When a customers check for payment on account is recorded and deposited in the bank but it gets returned because of insufficient funds. What is the proper entry?

When a customer's check is returned due to insufficient funds, the proper journal entry involves reversing the initial deposit. You would debit the Accounts Receivable account to reflect that the payment is no longer valid and credit the Cash account to reduce the cash balance. Additionally, you may want to record a fee charged by the bank, debiting an expense account for bank fees.