A rubber check is a check that is not paid (or honored) by the bank on which it is drawn. The reason the check is not paid is the maker’s account had insufficient funds or not sufficient funds (NSF). Instead of the check being paid, it will be returned (or bounced back) through the banking system. Because the check was bounced back by the bank, the check is described as a rubber check.
A rubber check also causes bank fees for the maker of the check and for the depositor of the check. These fees need to be recorded in the general ledger accounts. If the fees are overlooked initially, they will be adjusting items to the balance per books in the bank reconciliation.
If a rubber check is not redeposited by the payee, the payee must also reduce its general ledger cash account for the amount of the check (and also debit another general ledger account).
