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Processing dishonoured cheques

Processing dishonoured cheques

When you receive a cheque and the bank dishonours it, you may want to:

  • reverse the dishonoured cheque which will reinstate the charges
  • allocate bank charges to the debtor.

Every cheque contains a record of the charges that were paid by that cheque.

Reversing dishonoured cheques

To reverse a dishonoured cheque:

  1. Select Module > Debtors > Cash Receipts Entry.
  2. Create a new posting and name it something meaningful, for example, 'Bounced cheque'.
  3. Select Posting Action > Reverse Bounced Payment.
    The Reverse Bounced Payment window is displayed.
  4. Click to locate the receipt number for the bad cheque.
  5. Enter a description for the reversal that will appear on the debtor's next statement.
    Note: Posting Action > Audit Print reveals that the reversal has effectively been processed as a negative cash receipt. It is recommended that you do not enter negative cash receipts manually.

Allocating bank charges to the debtor
Dishonoured cheques normally incur a bank charge. To charge the debtor for the bank fees incurred by a dishonoured cheque, either:

  • Create a manual charge using your code for Bank Fees - Dishonoured cheque, such as FBFEE.
  • Create a general ledger journal drawing the amount from the bank account into the bank fees account.

Example
A debtor gives you a cheque for $1000 to pay for $1000 owing in 120+ days. When you enter the cheque, it deletes the 120+ days overdue amount for that debtor.
The cheque is dishonoured and you subsequently reverse the bounced cheque. The original charges are reinstated and the debt is 120+ days overdue, as before.
In addition, you create a manual charge for the dishonoured fee bank charge of $25 incurred by the dishonoured cheque.
The debtor's account history will list the bounced cheque reversal and bank fee for the dishonoured cheque.
The following table shows the transactions:

Debtor Charge

Account

G/L Account

Amount

DISHON Charge:

Bank

610000

$1000-

 

Debtors Control

620000

$1000

DISFEE Charge:

Bank Charges

246703

$25-

 

Debtors Control

620000

$25

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