I paid a vendor with a check that was reversed by the bank. When i accept that return check it shows as a sale in p/l report. How do i categorize it correctly?

Hello there, Katie. There are various ways to handle a bounced check. We can create a journal entry to reverse it or void the check. I'll provide a scenario below.

The returned check appears in your Profit and Loss report, depending on the type of account it was associated with when recorded, and how the bank treats the returned check.

If your bank records every bank and reversal, you can create a journal entry to reverse the bounced check. I still recommend consulting your accountant before taking these steps.

Here's how to create a journal entry:

1. Click + New, then select Journal Entry.
2. Enter the date the check bounced in the Journal Date field.
3. On the first line, choose the bank account from the dropdown menu in the Account column.
4. Input the check amount in the Debits column.
5. On the second line, choose Accounts Payable from the Account dropdown. The check amount will automatically populate.
6. From the Name column, select the supplier.
7. Hit Save.
    

Now, let's reopen the bill and link the bounced check to the journal entry:

1. Head to the Expenses menu, then select Vendors.
2. Locate and click on the supplier's name.
3. In the Transaction List area, choose the bounced check.
4. Uncheck the box for the bill, then check the one for the journal entry.
5. Confirm that you want to make the changes, then hit Save.

If there's a bank fee, here's how to record it:

1. Click + New, then select Expense.
2. From the Payee dropdown menu, select the supplier if the bank charged it to them or the bank if they charged it to your account.
3. Select the account you use to pay expenses in the Payment account dropdown.
4. Under the Category column, select Bank Charges.
5. Complete the necessary details, then hit Save.
    

For the other scenarios and solutions, visit this article: What to do if your check bounces and your bank account has insufficient funds.

If you're seeking tips and best practices in categorizing your future transactions, consider connecting with our QuickBooks Live Expert Assisted team. Our experts have extensive experience handling vendor and bank transactions, ensuring your financial management runs seamlessly.

For future reference, you can use these resources as a guide to help you reconcile your accounts and run the Transaction List by Vendor report to view all transactions tied to your vendors:

• Learn the reconciliation workflow in QuickBooks
• Run a report in QuickBooks Online

By following the steps and reviewing the related article to determine which scenarios fit your situation, you can ensure that you categorize or record the bounced check accurately. Add a comment below if you have further clarification on the process.