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QueenBeeJen
November 12, 2022
Question

How to record Manual Payroll Check Returned NSF

  • November 12, 2022
  • 1 reply
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I missed my direct deposit deadline and had to write manual checks for payroll.  A vendor processed a large payment early which caused one of the payroll checks to be returned NSF.  Luckily it was my check that was returned so our employees weren't affected but I am not sure how to handle this when doing my account reconciliation.  The bank took the funds out one day and returned (redeposited) them NSF with an NSF fee the next day.  Do I void the check and reissue it or do I have to create a journal entry with the Fed/SS/Medicare/etc deductions reversed?  How do I enter the redposit of funds into the business account on the following day? 

 

Thanks!

Jen

1 reply

R
Rasa-LilaM
November 13, 2022

I'm here to assist and guide you on how to record the returned paycheck, QueenBeeJen.

 

Let's leave the check as it is, so there's no need to reissue one. Then make a transfer, either through a journal entry or by creating a clearing account.

 

As always, I recommend consulting with an accountant for advice on the best way to handle the situation. You can also check whether to make a deposit and which accounts to use for the journal entry.

 

While waiting for the information, let me share the steps on how to set up a clearing account. Here's how:

 

  1. In QuickBooks, go to Lists at the top bar and choose Chart of Accounts.
  2. Right-click anywhere in the Chart of Accounts and select New.
  3. In the Add New Account window, tick the radio button for Bank and tap the Continue button.
  4. In the Account Name field, enter Clearing Account, Barter Account, or Wash Account.
  5. Do not enter an opening balance.
  6. Press the Save & Close button.

 

After creating the account, you can now use it. For detailed instructions, go to the To use a clearing account section in this article: Set up a clearing account.

 

I've also included some resources that will walk you through the process of handling non-sufficient funds (NSF) for both customers and payroll:

 

 

For future reference, you can save the link to our online resources in your browser: Community guide. There, you'll find topics, answers, and resources to help you manage your business and accounting tasks more efficiently.

 

Feel free to visit the Community again if you have other QuickBooks concerns or additional questions about managing NSF transactions. I'd be delighted to assist further. Have a great weekend.

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