A customer's cheque comes back unpaid a week after you recorded the receipt. The customer's ledger still shows the debt cleared, the bank ledger shows money you do not have, and the bank has taken a return charge on top.
There is no special voucher for this in Tally. A bounce is a reversal, and the bank charge is a separate entry. The part that goes wrong is passing one and forgetting the other, or deleting the original receipt and losing the trail an auditor wants to see.
First, work out which cheque bounced
The entry depends on whose cheque it was and what you had already recorded.
| Case | What you had entered | What the bounce does |
|---|---|---|
| A customer's cheque you deposited | Receipt: Bank Dr, Customer Cr | The money never arrived, so the debt is back |
| Your cheque to a supplier | Payment: Supplier Dr, Bank Cr | The money never left, so the supplier is still owed |
| A cheque you never banked | Receipt, not yet cleared in the bank column | No reversal needed if it was never presented |
If you recorded the entry only when the bank statement showed it, there may be nothing to reverse. The statement shows what really happened, which is why the statement is the safest source for these entries.
A customer cheque returned unpaid
You banked the cheque and passed a receipt. The bank returns it. Reverse the receipt with a Payment voucher: debit the customer, credit the bank.
| Ledger | Dr | Cr |
|---|---|---|
| Customer | Amount | |
| Bank | Amount |
The customer's ledger now shows the original invoice, the receipt and the reversal, so the balance is owed again and the history is intact. Tally normally keeps bank entries to Payment, Receipt and Contra vouchers rather than Journal, which is why the reversal is a Payment.
Do not delete the receipt. Deleting it makes the customer ledger look as if the cheque never came, and the next person to read it has no idea why the bank statement shows a debit.
Important
Never edit the original receipt to change its amount to nil. The receipt was a true event on the day you recorded it, and the reversal is a second true event on the day the bank returned it.
Your own cheque returned unpaid
You issued a cheque to a supplier and recorded a payment. If the cheque is returned, the supplier has not been paid. Reverse with a Receipt voucher: debit the bank, credit the supplier.
| Ledger | Dr | Cr |
|---|---|---|
| Bank | Amount | |
| Supplier | Amount |
The supplier's ledger shows the payment and its reversal, so it correctly shows the amount as payable again. If the cheque was recorded but had not yet cleared in the bank reconciliation, check the statement first. A cheque that was never presented needs no reversal at all.
The bank charge is its own entry
The bank charges for returning a cheque, and that charge is a bank expense, not part of the cheque. Pass a Payment voucher: debit the bank charges ledger, credit the bank.
The charge usually carries GST, which you can claim as input credit if the bank has your GSTIN. How to split a bank charge and its GST is covered separately, and the ledger head to use is in which ledger head bank charges go under.
If your terms let you recover the charge from the customer, debit the customer and credit the bank charges ledger for the amount you will bill. Do this only when you actually raise the demand, not by default.
Pro tip
Keep the bounce and its charge as two vouchers on the same date. A single combined voucher hides the charge inside a customer ledger, and the bank charges total in your profit and loss comes out short.
What it looks like on the bank statement
A returned inward cheque typically shows as a debit with a narration such as "CHQ RET", "INW CHQ RTN" or "RETURN", followed by a separate small debit for the return charge. The wording differs by bank, so match on the amount and the date, not the narration alone.
When you read a statement into Tally, the return line is simply another debit. Assign it to the customer whose cheque it was, so their ledger shows the reversal, and assign the small charge to your bank charges ledger. Both lines then land where you would have put them by hand. Contra, payment and receipt vouchers explains how the voucher type follows the direction of the money.
Effect on the bank reconciliation
The original deposit and the return both appear on the statement, so both should be in Tally. Once the reversal is entered, the two cancel and the reconciliation closes. If the return is on the statement but not in Tally, it shows up as an unexplained difference equal to the cheque amount plus the charge. Reconciling the statement with Tally covers how to find it.
Outside the books
A bounced cheque can also be a legal matter under section 138 of the Negotiable Instruments Act. The demand notice has to go out within 30 days of receiving the bank's return memo, and the drawer then has 15 days to pay. That is for the client's counsel, not the accounts, but the date on the bank's return memo should be written in the customer's ledger narration so nobody has to hunt for it.
Conclusion
Three vouchers cover every case: a Payment to reverse a customer's returned cheque, a Receipt to reverse your own, and a Payment for the bank's return charge. Keep the original entry, add the reversal on the day the bank returned the cheque, and the ledger tells the whole story.
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