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SanACC
November 7, 2023
Solved

How to handle returned bill payment from a prior year

  • November 7, 2023
  • 1 reply
  • 0 views

Hello, I hope I can get some help on

A vendor was paid with paper online bill payment check through my bank. It was returned to the bank because the vendor's address had changed. The payment was redeposited 3 months later which was two months into the new year. How do I handle the bank's redeposit and the vendor's now unpaid bill from the prior fiscal year after all accounts had been reconciled? Other past years bills may be outstanding because of the same scenario. We have since contacted the vendor and updated the account information in the online banking.

Thank you for your help,

SanACC

Best answer by Rainflurry

@SanACC 

 

IMO, the proper way to handle this is to make a journal entry (a journal entry records this under the vendor's account) as of the date the check was returned to the bank: debit bank account, credit A/P (select vendor under 'NAME' on the A/P credit line).  When you write the new check, assign A/P to the check.  Then, go to Pay Bills and apply the "credit" created by the new check to the "bill" created by the returned check.  This process keeps everything from last year reconciled and the only impact it has on the current year's financials is the deposit for the returned check and the payment issued by the new check, both of which you will clear the next time you reconcile the bank account.       

1 reply

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DebSheenD
November 7, 2023

Hello, @SanACC. I want to ensure you'll be able to record the returned bill payment correctly in QuickBooks Desktop (QDBT).

 

Thanks for sharing detailed information about your concern. To resolve this, we can create a Journal Entry (JE) to reverse the returned bill payment in QuickBooks. I highly recommend reaching out to your accountant to further advise you on how to handle the returned funds. If you're not affiliated with one, you can use our Find an Accountant tool to look for one near your area. 

Let me guide you to accomplish the task:

 

  1. Go to the Company menu and select Make General Journal Entries.
  2. Ensure the Date and Entry No is correct.
  3. Debit the checking account for the amount of the bill payment check.
  4. Credit the A/P account for the amount of the bill payment check.
  5. Input the Vendor name.
  6. Click Save & Close.

 

The second is to unlink the bill from the payment check, then link it to the journal entry you've created. Here are the steps:

 

  1. Open the original bill payment check.
  2. Uncheck the bill that was originally paid by the bill payment check.
  3. Check the journal entry created.
  4. You may enter a Memo to indicate the check was returned bill payment.
  5. Tap Save and Close.

 

For the complete process, check this article and proceed with Steps 3 & 4: Manage a bounced check.

 

Once done, you can start reconciling the account to ensure your books are up-to-date.

 

Please don't hesitate to leave a reply below if you have any other concerns managing your transactions in QuickBooks. Have a good one and stay safe. 

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SanACCAuthor
November 7, 2023

Thank you DebSheenD for your quick response. I kind of understand the instructions for creating the journal entry. Since the initial payment was made in the prior year and all bank statements were reconciled and tax documents have been filed, does this affect any of the previous year's reconciliations? Or create any discrepancies?

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MadelynC
November 7, 2023

If you make updates or any adjustment entries for the impacted period, then yes, it affects your previous year’s reconciliation and tax documents, @SanACC. Allow me to chime in and provide additional information about managing returned bill payments from a prior year.


QuickBooks Desktop tracks transactions based on the date they're entered. Any changes after reconciliation or tax filing will impact and cause discrepancies.


As mentioned by my peer above, it’s best to contact your accountant for the best course of action. They can guide you further to ensure records remain intact, accurate, and error-free.


You can access this guide anytime if you need insights about doing or fixing a reconciliation: Learn the reconciliation workflow in QuickBooks. This includes ways to make changes after you process them.


If you have any specific concerns or need further assistance operating your books, please let me know. I'll always be here to help in any way I can.

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