Question

Banks Reconciliation - Bank Adjustment on Cleared Checks

Forum|Forum|4 years ago
January 12, 2022
1 reply
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I have two vendor invoices that were paid 5 months ago and the checks have since been reconciled. The bank sent a letter of Adjustment almost two weeks ago stating that those two payment have since been "adjusted" which basically means voided. The Vendor (which the check was made out to) was purchased by another company (who cashed the check) which apparently is why the bank "adjusted" the checks/payments. What is the best/cleanest way to handle this?

QuickBooks Desktop

MaryLandT

I'm here to help you settle the adjusted check, PBarber1.

You can create a vendor credit and apply it to your future invoices. Here's how:

From the Vendors menu, select Enter Bills.
Select the Credit radio button to account for the return of goods.
Enter the Vendor name.
Select the Expenses tab and enter the Accounts on the original bill.
In the Amount column, enter the appropriate amount for each Account (the amounts may have to be prorated).
Click Save and Close.

And, here's how to apply the credit to your future invoices.

From the Vendors menu, select Pay Bills.
Check the credit memo that matches the Vendor check amount.
Select Set Credits and apply the Bill Credit you created earlier then select Done.
Select Pay Selected Bills, then Done.

Upon sharing this, I still suggest consulting with your accountant. They can provide specific instructions since the payment was made 5 months ago. This is to ensure you have accurate records on your books.

In addition to this, recording vendor credits depends on how you receive a refund. You can browse this link to learn how to handle this in QuickBooks: Record a vendor refund in QuickBooks Desktop.

Don't hesitate to post again if you have other QuickBooks concerns. Or leave a comment below if you have additional questions about managing adjusted checks.

P

PBarber1Author

Mary,

I don't believe I was clear, I understand how to process a vendor credit/refund. Granted, it is rather confusing and I may be overthinking this too. This is in regards to two checks that were paid to a vendor (utility company) and reconciled in our Checking Account some 5 months ago. Our bank originally honored the checks when the company submitted for payment but because the check was made out to the original utility company that then merged with another (we were not informed regarding the merger at the time of payment) but submitted for payment by the merged company. In December, our bank "adjusted" the July payments that had already been processed and reconciled, crediting our account essentially leaving it as the vendor was never paid for that invoice. The problem comes into play because the payment and checking account was reconciled in July as well as all the subsequent monthly reconciliations. My thought is that the best solution is to do a journal entry. Is this what you would recommend?

JessT

Thank you for the additional details, PBarber1.

I'll continue to help you. However, can you also clarify how your bank created/processed the adjustment as I can think of 3 scenarios based on your description? I’ll state them, and you can follow the solution on the scenario that applies to the situation.

Your bank removed the payment transaction in July.
- In this case, you will also remove/void the transaction because there is nothing to reconcile in the actual bank account. Then, you can redo your reconciliation from July to the last reconciled month.
The payment transaction remains in July, but the bank also made a reversed/adjustment transaction dated July. This is somewhat uncommon because backdating an adjustment is a rare situation on bank records.
- In this case, you can record the adjustment as a journal entry or a bank deposit. Then, you can redo your reconciliation from July until the last reconciled month.
The payment transaction remains in July, but the bank posted an adjustment dated December. That is, there is a type of reversal transaction dated December.
- In this case, you only need to redo your December reconciliation.

Undoing a reconciliation means that you have to remove the Reconciled indicator/checkmark on each transaction in a particular month. You can start with your transactions in July. But first, back up your company file for your copy of your current records.

Go to the Lists menu and choose Chart of Accounts.
Double-click the account in concern.
Click the Reconciled mark (checkmark) of a transaction, and click Yes when the confirmation warning pops up. Do the same thing to other transactions.

You can always visit us back in this thread if you need more help with your transaction. The Community team is always available to lend a helping hand. Take care and have a good one!

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