A Bounced Customer Check Needs Its Own Entry to Keep the Trail Intact
When a customer check bounces, the bank records it as a debit. In MIP®, that debit needs to be reflected explicitly. The correct approach is to record a journal voucher that moves the amount back to accounts receivable and then mark that entry cleared in the same bank reconciliation period.
Un-clearing the original deposit may seem faster, but it removes evidence of what actually happened. The original deposit did clear at one point, and reversing that history breaks the audit trail. Over time, this makes cash activity harder to explain and weakens support for both revenue and receivables.
Recording a separate NSF journal voucher mirrors the bank’s activity and preserves timing. The original deposit stays intact. The reversal is documented. Both sides clear appropriately. Anyone reviewing the reconciliation later can see the full sequence without reconstructing it from notes or memory.
This video is for accounting teams that want bank reconciliations to show what happened in the order it happened. It is not intended for organizations that prefer to overwrite history to make the current period easier.
McGovern Consulting Group provides MIP Accounting® Training and Implementation Services. We focus on preserving transaction integrity because clean books depend on traceable decisions, especially when something goes wrong.
If you want NSF items handled correctly without damaging your reconciliation trail, schedule time with us to review your process.
https://mcgoverncg.com/schedule/
If you want to strengthen your MIP fundamentals first, free MIP® fund accounting training is available here.
https://www.freemipfundaccountingtraining.com/
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