The window below shows the ledger postings of a typical Spend Money payment and reversal. Show
If the payment (Pay Bills or Spend Money) isn't going to be reissued, then use Receive Money to reverse the payment. Allocate the deposit reversal to the original expense account. Or, create a new Income account called Unrealised Expenses and allocate it to this account. If the payment is to be reissued, then use the same payment type that was used for the stale/stopped cheque. For example: Reversing a Pay Bills payment will cause the status of the closed Bill to revert back to Open. Use Pay Bills again when reissuing the payment. Similarly, use Spend Money if the original transaction was entered using Spend Money. Task 4 - Reconcile the cheque accountWhen you next reconcile your cheque account, you will need to select both the stale/stopped cheque (withdrawal) and the reversal (deposit) as Cleared. As they are for the same amount, they will negate each other leaving your cheque account balance unaffected. The example Reconcile Accounts window shown below has both the stale/stopped cheque and the reversal selected as Cleared. It also includes the reissued payment which is yet to be presented to the bank and is not selected as Cleared.
An unpresented check (or outstanding check) is a check that has been issued or drawn by the depositor but not presented to the bank for payment until the date that the bank statement is issued. When a check is issued to a creditor or third party, it is immediately recorded in the bank column on the credit side of the cash book. This reduces the bank balance in the cash book. However, the receiving party may not present the check to the bank for payment on the same date. The bank will only debit the depositor’s account when the check is presented to it, and this will be paid by the bank. So, as long the check remains unpresented, a disparity will exist between the balances of both the books. Do you know how to read a check? ExampleOn 28 January 2019, the balance as per the cash book and bank statement amounts to $10,000. On the same day, a check of $7,000 is issued to a creditor, Mr. John, who presents the check to his bank on 2 February 2019. Since Mr. John didn’t present the check to the bank for payment, the cash book shows a bank balance of $3,000, whereas the bank statement shows a bank balance of $10,000. There is a discrepancy of $7,000 between the balances of the books. Therefore, when checks are unpresented, the cash book’s balance appears lower than the bank statement’s balance. The difference between the balances of the cash book and bank statement caused by unpresented checks is only temporary. This is because the check will be eventually be presented; that’s why we will not alter our cash book. However, on the date of the bank statement, the amount of the check (i.e., $7,000) was shown in the bank account. As the bank statement shows a greater balance compared to the cash book, it is important to debit the amount of the unpresented cheque when preparing the bank reconciliation statement, which will bring up the balance to the level of the bank statement. Learn the easy wayNeed help in figuring out other banking terms? Here in Finance Strategists, we got you covered! Contact a financial advisor in Jersey City, NJ or visit our financial advisor page to see the areas we serve.
An unpresented check (or outstanding check) is a check that has been issued or drawn by the depositor but not presented to the bank for payment until the date that the bank statement is issued. What are the effects of unpresented checks on bank balance?When a check is issued to a creditor or third party, it is immediately recorded in the bank column on the credit side of the cash book. However, the receiving party may not present the check to the bank for payment on the same date. The bank will only debit the depositor’s account when the check is presented to it, and this will be paid by the bank. So, as long the check remains unpresented, a disparity will exist between the balances of both the books. What is the treatment of unpresented checks in bank reconciliation statement?We we will not alter our cash book because the check will be eventually be presented. As the bank statement shows a greater balance compared to the cash book, it is important to debit the amount of the unpresented cheque when preparing the Bank Reconciliation Statement, which will bring up the balance to the level of the bank statement. Which side of the cash book is credited when an unpresented check is issued?The credit side of the cash book is debited when an unpresented check is issued. This reduces the bank balance in the cash book. However, on the date of printing or preparing a Bank Reconciliation Statement, we will debit (in order to make the balance of the cash book equal to that of a bank statement) the amount of the check. How are the bank reconciliation statements prepared?To begin, you need to open a blank cash book. While doing this, it is important to determine which check dates correspond with the date of bank statement. You should also prepare a list of all the outstanding checks at the time of preparing the next Bank Reconciliation Statement, or by adding up all those checks that have not cleared the bank since the last reconciliation.
The definition of an outstanding check is a check that has been written, but it hasn’t been cashed-deposited by the bank, or otherwise cleared the bank.
An outstanding check can be a personal or a business check. Simply stated, the time between when you write a check and the check clears your bank account is when the check is considered an “outstanding check.” Why Do Outstanding Checks Matter?Professional accountants and bookkeepers deal with outstanding checks during reconciliation, a time where they are balancing their ledgers as they approach closing the books for the month. Individuals need to account for outstanding checks when they balance their checkbooks. When you write a personal check, you should record the date, check number, payee, and amount in your check register. This is very important because your bank balance will be higher than your available funds until the check clears the bank. Recording it in your register right away reminds you that those funds are earmarked for that check. Balancing your checkbook is akin to what professional accountants do during reconciliation. It’s a way of making sure that you and your bank agree about your account balance and available funds. It accounts for outstanding checks. It can be tricky to balance a checkbook and we have a worksheet with step-by-step instructions to help you. If you don’t account for outstanding checks properly, then you risk spending the money for the check on something else. This could result in a "bounced check", and you may be charged a “non-sufficient funds” (NSF) fee by your bank. It may also damage your relationship with the vendor or person you gave the check to.
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If you wrote a check and it has been outstanding for a while, you may be wondering, “Do checks expire?” They do expire and that’s why it’s important to record the date you wrote the check. There are a few things you should do about an outstanding check that you wrote to someone else: If the check is less than six months old:
If the check is older than six months (a stale check):
Should You Write Another Check?If the outstanding check is less than six months old, you should not write another check. The original check is still valid, and the payee can cash or deposit it. It’s fine to contact the recipient after a few weeks to find out if they’ve lost the check or when they plan on cashing it. This may nudge them into depositing the check. If they can’t get to the bank, you may want to ask them to return the check to you and you can pay them using another method. If the outstanding check has expired, you may want to write another check; however, it’s possible that this check will go stale, too, and that would prolong the situation. When you ask them how they want to be paid, try suggesting a money order, cashier’s check, or cash. You can ask if they’re willing to deduct the stop payment fee from the original amount. They may not agree to that, but it’s worth asking. |