Sometimes cheques you receive may be dishonoured due to a variety of reasons. Accordingly there are different ways to capture this type of transaction. Cheques usually dishonour due to post dating, lack of funds in the drawers account, stop cheque requests and insufficient or incorrect signatories.

For example, payment is often considered conditional on cheque clearance so you might like to consider legal, legislative and internal issues that impact your accounting. So query your adviser as to which method is best for your circumstance. If you learn of any more please let us know so we can add them to our list:

Sample Methods For Capturing Dishonoured Cheques

• Delete the payment applied to the original Sale that represents the dishonoured cheque. Create a Purchase or Journal to represent the bank fee and flow of funds through your Bank Account for the original dishonour. Request new payment from your customer or wait for their notification that the original cheque can be re-deposited. Create a Sale to charge your customer for dishonour and admin fees if applicable.
  Note this may not be suitable if you have submitted tax or other regulatory info basis the entry already
• Close the original sale with a payment. Issue a new Sale Adjustment/Credit Note using the the money reversed out of your bank to close it. Create a Sale to charge your customer for dishonour and admin fees if applicable.
  Check with your Advisor if this is an acceptable practice in your tax zone.
• Apply the payment received against your Sale. Enter a General Journal representing the reversal the bank puts through to represent the money the customer now owes you again. e.g. Choose an account code such as Loan:Failed Settlements or Loan:Dishonoured Payments or similar. Use that account to track who owes you money for dishonoured cheques. Create a Sale to charge your customer for dishonour and admin fees if applicable.
  This method has the disadvantage of not tracking the liability against the actual contact in the Loan: Money Owed To Me Account but it does keep the Sale transactions clear of deletions or edits.