Cheque Return Journal Entry
A cheque return occurs when a cheque that was previously deposited is not honored by the bank, often due to insufficient funds, incorrect account details, or other reasons. Here's how to record the journal entry for a returned cheque.
Scenario: Cheque Return Due to Insufficient Funds
Assume a cheque of ₹25,000 deposited by the company was returned due to insufficient funds.
Journal Entry
| Particulars | Debit (₹) | Credit (₹) |
|---|---|---|
| Accounts Receivable A/c | 25,000 | |
| To Bank A/c | 25,000 | |
| (Being cheque returned due to insufficient funds) |
Explanation:
- Debit Accounts Receivable A/c: Reverses the reduction in accounts receivable when the cheque was initially deposited, as the amount is still owed by the debtor.
- Credit Bank A/c: Reverses the increase in the bank account when the cheque was initially deposited, as the amount is not actually received.
