Jeff,

Like you I volunteer as treasurer for my church and am not an accountant.  I handle returned donation checks in a simpler fashion than others have described, especially when they were deposited in a batch with many other good checks and when, as is often true today, the bank does not charge an NSF fee.

To start, skip what was said about creating an item, and an income account for tracking bounced checks and their associated charges.  If there are charges, you can create an expense account called something like bank fees to enter and track those if you don't already have such an account.

Create a journal entry to reverse the original deposit. Here's how:

1. Go to the Company menu, then select Make General Journal Entries.
2. In the Make General Journal Entries window, enter the date the items were returned per your bank records.
3. Debit your income account(s) for the same amount(s) of the NSF check(s).  Use the same income account(s) as the ones to which the donations were originally credited.
4. If the donations were to separate funds as you have indicated, and if you use separate income accounts for each fund, then you will have multiple lines with debits to those different income accounts.  For instance, one line will be a debit to your General Fund Contributions Income account and another line will be a debit to your Building Fund Contributions Income account.
5. Enter a note in the Memo column describing the transactions as returned check(s).
6. On another line credit the checking or bank account that received the original deposit.
7. If the donations were to separate funds as you have indicated, and if you use separate bank accounts for each fund, then you will have multiple lines with credits to those separate bank accounts.
8. If you use classes to track your fund balances, be sure to enter the appropriate Classes (funds) in the Class column in each of your debit and credit lines.  If you use one bank account for multiple funds, you will need to split up the credits among multiple lines with a different class's transactions on each line.
9. When you finish, make sure your debits and credits equal one another in amounts.  Also make sure your debits and credits for each class (fund) equal one another.  Otherwise, when you later run a Balance Sheet by Class, you will find Unbalanced Classes at the bottom.
10. Click Save and Close.

Hope this helps.