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Accounting for stale dated checks?

 
 
Angela Thornton
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      11-24-2003, 02:59 PM
This is probably an Accounting 101 question, but I'll be darned if I
remember it.

Our firm wrote a check two years ago which was never cashed. What is
the right way to handle this? Just voiding the check doesn't seem
right, but it drives me nuts every month when I balance the bank.

Plus, it seems that if the original payee ever came looking for the
money, I would want a clearer trail.

TIA,

Angie T
 
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Wayne Brasch
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      11-24-2003, 03:58 PM

"Angela Thornton" <(E-Mail Removed)> wrote in message
news:(E-Mail Removed) om...
> This is probably an Accounting 101 question, but I'll be darned if I
> remember it.
>
> Our firm wrote a check two years ago which was never cashed. What is
> the right way to handle this? Just voiding the check doesn't seem
> right, but it drives me nuts every month when I balance the bank.
>
> Plus, it seems that if the original payee ever came looking for the
> money, I would want a clearer trail.
>
> TIA,
>
> Angie T


You might want to call whoever the check was made payable to and ask them
why it was never negotiated.
Despite this, though, because of the age of the situation, I would recommend
voiding the check by debiting Cash and crediting your equity account
depending on what type of organization your company is. That would be
Retained Earnings if a corporation. If you have to issue another check
after you have voided the old one, do the reversal of this that I explained
above since the expense related to that expenditure was in the past.

Wayne Brasch, CPA, M. S. Taxation


 
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Bill Lentz
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      11-24-2003, 04:44 PM
On Mon, 24 Nov 2003 10:58:10 -0500, "Wayne Brasch"
<(E-Mail Removed)> wrote:

>
>"Angela Thornton" <(E-Mail Removed)> wrote in message
>news:(E-Mail Removed). com...
>> This is probably an Accounting 101 question, but I'll be darned if I
>> remember it.
>>
>> Our firm wrote a check two years ago which was never cashed. What is
>> the right way to handle this? Just voiding the check doesn't seem
>> right, but it drives me nuts every month when I balance the bank.
>>
>> Plus, it seems that if the original payee ever came looking for the
>> money, I would want a clearer trail.
>>
>> TIA,
>>
>> Angie T

>
>You might want to call whoever the check was made payable to and ask them
>why it was never negotiated.
>Despite this, though, because of the age of the situation, I would recommend
>voiding the check by debiting Cash and crediting your equity account
>depending on what type of organization your company is. That would be
>Retained Earnings if a corporation. If you have to issue another check
>after you have voided the old one, do the reversal of this that I explained
>above since the expense related to that expenditure was in the past.
>
>Wayne Brasch, CPA, M. S. Taxation
>


I'm not sure I would run the transaction through equity as it could
make preparing next year's tax return confusing when the current
equity balance doesn't equal last year's ending balance plus or minus
this years' net income (whew, how's that for a run on sentence!)

In addition, although I don't know of many people that actually do it,
your state may have escheat laws that would require you to turn the
money over to them.

I would probably just void the check, run it through miscellaneous
expense, and file the paperwork in the payee's invoice or similar
file. (assuming, as Wayne says, I couldn't get hold of them to find
out why they hadn't cashed the check.)

Bill
 
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Wolfgang Rochow
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      11-24-2003, 05:14 PM

"Bill Lentz" <(E-Mail Removed)> wrote in message
news:(E-Mail Removed)...
> On Mon, 24 Nov 2003 10:58:10 -0500, "Wayne Brasch"
> <(E-Mail Removed)> wrote:
>
> >
> >"Angela Thornton" <(E-Mail Removed)> wrote in message
> >news:(E-Mail Removed). com...
> >> This is probably an Accounting 101 question, but I'll be darned if I
> >> remember it.
> >>
> >> Our firm wrote a check two years ago which was never cashed. What is
> >> the right way to handle this? Just voiding the check doesn't seem
> >> right, but it drives me nuts every month when I balance the bank.
> >>
> >> Plus, it seems that if the original payee ever came looking for the
> >> money, I would want a clearer trail.
> >>
> >> TIA,
> >>
> >> Angie T

> >
> >You might want to call whoever the check was made payable to and ask them
> >why it was never negotiated.
> >Despite this, though, because of the age of the situation, I would

recommend
> >voiding the check by debiting Cash and crediting your equity account
> >depending on what type of organization your company is. That would be
> >Retained Earnings if a corporation. If you have to issue another check
> >after you have voided the old one, do the reversal of this that I

explained
> >above since the expense related to that expenditure was in the past.
> >
> >Wayne Brasch, CPA, M. S. Taxation
> >

>
> I'm not sure I would run the transaction through equity as it could
> make preparing next year's tax return confusing when the current
> equity balance doesn't equal last year's ending balance plus or minus
> this years' net income (whew, how's that for a run on sentence!)
>
> In addition, although I don't know of many people that actually do it,
> your state may have escheat laws that would require you to turn the
> money over to them.
>
> I would probably just void the check, run it through miscellaneous
> expense, and file the paperwork in the payee's invoice or similar
> file. (assuming, as Wayne says, I couldn't get hold of them to find
> out why they hadn't cashed the check.)
>
> Bill


I agree as far as the Equity issue is concerned. However, I would take this
approach:
1. Contact the Payee and, if successful, reissue another check with the
appropriate accounting entry (effectively Dr Bank, Cr Bank).
2. If not successful, record the fact that you have an unsettled liability
and cancel thec check by setting up a payable (Dr Bank, Cr Accounts
Payable).
3. If and when you want to write it off, Dr Bank but Cr Miscellaneous
Revenue.

Wolfgang Rochow


 
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Bill
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      11-24-2003, 06:52 PM
(E-Mail Removed) (Angela Thornton) wrote in message news:<(E-Mail Removed). com>...
> This is probably an Accounting 101 question, but I'll be darned if I
> remember it.
>
> Our firm wrote a check two years ago which was never cashed. What is
> the right way to handle this? Just voiding the check doesn't seem
> right, but it drives me nuts every month when I balance the bank.
>
> Plus, it seems that if the original payee ever came looking for the
> money, I would want a clearer trail.
>
> TIA,
>
> Angie T


From working in a variety of businesses and non-profits, to take the
check off your reconciliation, debit cash and either credit misc
income or credit the expense where the check was originally charged.
Since it's two years old, I would go to misc income myself. I would
do it manually instead of voiding the check where some systems try to
go all the way back to the check date. Take a look at your a/p setup
in your software and see if that can be changed to the current period.
Hope this helps and gives you some options.
 
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Wayne Brasch
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      11-25-2003, 12:43 AM

"Bill Lentz" <(E-Mail Removed)> wrote in message
news:(E-Mail Removed)...
> On Mon, 24 Nov 2003 10:58:10 -0500, "Wayne Brasch"
> <(E-Mail Removed)> wrote:
>
> >
> >"Angela Thornton" <(E-Mail Removed)> wrote in message
> >news:(E-Mail Removed). com...
> >> This is probably an Accounting 101 question, but I'll be darned if I
> >> remember it.
> >>
> >> Our firm wrote a check two years ago which was never cashed. What is
> >> the right way to handle this? Just voiding the check doesn't seem
> >> right, but it drives me nuts every month when I balance the bank.
> >>
> >> Plus, it seems that if the original payee ever came looking for the
> >> money, I would want a clearer trail.
> >>
> >> TIA,
> >>
> >> Angie T

> >
> >You might want to call whoever the check was made payable to and ask them
> >why it was never negotiated.
> >Despite this, though, because of the age of the situation, I would

recommend
> >voiding the check by debiting Cash and crediting your equity account
> >depending on what type of organization your company is. That would be
> >Retained Earnings if a corporation. If you have to issue another check
> >after you have voided the old one, do the reversal of this that I

explained
> >above since the expense related to that expenditure was in the past.
> >
> >Wayne Brasch, CPA, M. S. Taxation
> >

>
> I'm not sure I would run the transaction through equity as it could
> make preparing next year's tax return confusing when the current
> equity balance doesn't equal last year's ending balance plus or minus
> this years' net income (whew, how's that for a run on sentence!)
>
> In addition, although I don't know of many people that actually do it,
> your state may have escheat laws that would require you to turn the
> money over to them.
>
> I would probably just void the check, run it through miscellaneous
> expense, and file the paperwork in the payee's invoice or similar
> file. (assuming, as Wayne says, I couldn't get hold of them to find
> out why they hadn't cashed the check.)
>
> Bill


Bill,

Your method is not in compliance with generally accepted accounting
principles. This was a transaction that occurred two years ago and that
period's results have been closed into the equity account as it should have
been. If you void this check now, you should debit the Cash or Bank
account and credit the equity account. If you later issue the check again,
you should debit the equity account and credit Cash. This is not an entry
to enter into the present day's activities.

Wayne Brasch, CPA, M. S. Taxation


 
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Wayne Brasch
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      11-25-2003, 12:47 AM

"Bill" <(E-Mail Removed)> wrote in message
news:(E-Mail Removed) om...
> (E-Mail Removed) (Angela Thornton) wrote in message

news:<(E-Mail Removed). com>...
> > This is probably an Accounting 101 question, but I'll be darned if I
> > remember it.
> >
> > Our firm wrote a check two years ago which was never cashed. What is
> > the right way to handle this? Just voiding the check doesn't seem
> > right, but it drives me nuts every month when I balance the bank.
> >
> > Plus, it seems that if the original payee ever came looking for the
> > money, I would want a clearer trail.
> >
> > TIA,
> >
> > Angie T

>
> From working in a variety of businesses and non-profits, to take the
> check off your reconciliation, debit cash and either credit misc
> income or credit the expense where the check was originally charged.
> Since it's two years old, I would go to misc income myself. I would
> do it manually instead of voiding the check where some systems try to
> go all the way back to the check date. Take a look at your a/p setup
> in your software and see if that can be changed to the current period.
> Hope this helps and gives you some options.


Your method does not comply with generally accepted accounting principles
and it creates more income on which the company will have to pay taxes when
the present year's tax return is prepared.

Wayne Brasch, CPA, M. S. Taxation


 
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Janice Davis
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      11-25-2003, 02:39 AM
One way to avoid this in the future is to do what a lot of big companies do;
on the payroll check have the words "Void after 180 days of issue." Of
course this doesn't help you in making the entries for this, but should the
guy/gal want to cash-- a simple "I'm so sorry, but you had six months."

Janice

"Wayne Brasch" <(E-Mail Removed)> wrote in message
news:(E-Mail Removed)...
>
> "Bill" <(E-Mail Removed)> wrote in message
> news:(E-Mail Removed) om...
> > (E-Mail Removed) (Angela Thornton) wrote in message

> news:<(E-Mail Removed). com>...
> > > This is probably an Accounting 101 question, but I'll be darned if I
> > > remember it.
> > >
> > > Our firm wrote a check two years ago which was never cashed. What is
> > > the right way to handle this? Just voiding the check doesn't seem
> > > right, but it drives me nuts every month when I balance the bank.
> > >
> > > Plus, it seems that if the original payee ever came looking for the
> > > money, I would want a clearer trail.
> > >
> > > TIA,
> > >
> > > Angie T

> >
> > From working in a variety of businesses and non-profits, to take the
> > check off your reconciliation, debit cash and either credit misc
> > income or credit the expense where the check was originally charged.
> > Since it's two years old, I would go to misc income myself. I would
> > do it manually instead of voiding the check where some systems try to
> > go all the way back to the check date. Take a look at your a/p setup
> > in your software and see if that can be changed to the current period.
> > Hope this helps and gives you some options.

>
> Your method does not comply with generally accepted accounting principles
> and it creates more income on which the company will have to pay taxes

when
> the present year's tax return is prepared.
>
> Wayne Brasch, CPA, M. S. Taxation
>
>



 
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Wayne Brasch
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      11-25-2003, 02:44 AM

"Janice Davis" <(E-Mail Removed)> wrote in message
news:khzwb.12149$_h.11307@lakeread02...
> One way to avoid this in the future is to do what a lot of big companies

do;
> on the payroll check have the words "Void after 180 days of issue." Of
> course this doesn't help you in making the entries for this, but should

the
> guy/gal want to cash-- a simple "I'm so sorry, but you had six months."
>
> Janice
>
> "Wayne Brasch" <(E-Mail Removed)> wrote in message
> news:(E-Mail Removed)...
> >
> > "Bill" <(E-Mail Removed)> wrote in message
> > news:(E-Mail Removed) om...
> > > (E-Mail Removed) (Angela Thornton) wrote in message

> > news:<(E-Mail Removed). com>...
> > > > This is probably an Accounting 101 question, but I'll be darned if I
> > > > remember it.
> > > >
> > > > Our firm wrote a check two years ago which was never cashed. What is
> > > > the right way to handle this? Just voiding the check doesn't seem
> > > > right, but it drives me nuts every month when I balance the bank.
> > > >
> > > > Plus, it seems that if the original payee ever came looking for the
> > > > money, I would want a clearer trail.
> > > >
> > > > TIA,
> > > >
> > > > Angie T
> > >
> > > From working in a variety of businesses and non-profits, to take the
> > > check off your reconciliation, debit cash and either credit misc
> > > income or credit the expense where the check was originally charged.
> > > Since it's two years old, I would go to misc income myself. I would
> > > do it manually instead of voiding the check where some systems try to
> > > go all the way back to the check date. Take a look at your a/p setup
> > > in your software and see if that can be changed to the current period.
> > > Hope this helps and gives you some options.

> >
> > Your method does not comply with generally accepted accounting

principles
> > and it creates more income on which the company will have to pay taxes

> when
> > the present year's tax return is prepared.
> >
> > Wayne Brasch, CPA, M. S. Taxation
> >
> >

>
>


There was no indication that this was a payroll check, but your idea may
work for other than payroll checks as well.

Wayne Brasch, CPA, M. S> Taxation


 
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Janice Davis
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      11-25-2003, 03:23 AM

>
> There was no indication that this was a payroll check, but your idea may
> work for other than payroll checks as well.
>
> Wayne Brasch, CPA, M. S> Taxation
>


Right you are! I have spent many years working retail and understand the
importance of a company's bottom line in many areas. I have learned to get
tough with customers without being rude. After all, a job for many is a
livelihood not a hobby.
Janice


 
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