Your method makes the most sense to me for processing a bounced check that was received via Donation/Sales Receipt by writing an NSF check in the register.

However, the missing piece in the puzzle for me is that if I go to Reports>Nonprofit>Donor Contribution Summary - the customer's report shows that he has given/donated both the bounced check amount and the makeup check amount.  So he bounced a check for $2500.  I wrote an NSF check for $2500.  This makes my register look fine and reconciliation takes place as it should, but the reporting is wrong.  I have spent hours and hours on this, trying different methods, including invoice/pmt, JE, Reversing JE ---all to no avail.

I cannot tell you how much I would appreciate your help.