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Explain a bounced cheque received

How to deal with the three transactions for a cheque from a customer that's bounced, in FreeAgent.

Here's how to deal with a cheque a customer paid you for an invoice, which bounces.

Navigate to the 'Banking' tab at the top of the screen and select 'Bank Accounts' from the drop down menu.

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Choose the account which the cheques were paid into.

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You'll usually see three transactions in your bank account; the original cheque, that cheque being returned by the bank, and a new cheque.

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Explain the first transaction, the original cheque, with type Other Money In and reason Receipt into Contra Account, like this.

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Make sure that you don't choose to apply this explanation to any similar transactions.

Explain the second transaction, the payment for the cheque being returned by the bank, with type Other Money Out and reason Payment from Contra Account. This will net off these two transactions together without affecting that customer's account.

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Then finally explain the third transaction, the second cheque arriving from the customer, as a receipt against the invoice in question.

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The transactions will all three show as explained in your bank account and the invoice will show as paid, and the bounced cheque will not affect your profit or tax figures.

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