Cheque Received And Deposited Dishonoured Journal Entry

 

A cheque / check may refuse by bank to honor due to errors, mistakes committed by owner of the cheque. It is a case of dishonor of cheque and such cheque is called dishonoured cheque. In such case, we returned the cheque to person from whom we received the cheque / check.

In case of dishonor of check / cheque, we record journal entry by debited account name of the person from whom we received cheque and credit the bank account as shown below:

(Assuming, we received cheque from Mr. A)

 

                                                        Mr. A  XXX

 

                                                                   Bank a/c  XXX

 

                                                 (Cheque Returned Dishonoured)

 

Disnhonour of cheque journal entries depend upon different cases of dishonour of cheque which are expressed below:

(i) Cheque Received From Customers Returned Dishonoured

When we received cheque from our customer, Mr. A and deposited into bank for collection on the same date. The company record the following entry for receiving cheque:

                                                Bank a/c  XXX

  

                                                               Mr. A  XXX

 

                                              (Cheque Received From M. A)

 

After some days, due to some valid reasons, the bank returned the cheque as dishonoured to the company. The company, then, returned the cheque to customer and record the cheque dishonoured entry which is the reversal of above entry as shown below:

 

                                                        Mr. A  XXX

 

                                                                   Bank a/c  XXX

 

                                            (Cheque Returned as Dishonoured)

 

(ii) If we received Cheque From Customer, Mr. A And Endorse To Our Accounts Payable, Mr. B but Returned Dishonoured by Bank

In that case we record the following journl entries in the books of business as shown below:

(a) 

                                                 Cash a/c  XXX

 

                                                               Mr. A  XXX

 

                                             (Cheque Received From Mr. A)

 

(b)

 

                                                       Mr. B  XXX

 

                                                               Cash a/c XXX

 

                                                 (Cheque Endorsed To Mr. B)

 

(c)

 

                                                      Mr. A  XXX

 

                                                                  Mr. B  XXX

 

                                 (Cheque Endorsed To Mr. B Returned Dishonoured)

 

Now, Mr. A and Mr. B become our customer and accounts payable / supplier again respectively as cheque is not honour by bank for payment. So our supplier / creditor, Mr. B returned the cheque to us and we returned it to our customer, Mr. A.