USA Void check help

[Julia T]

Hi, need a little help
My question is in regards to voided checks.
I understand that by the principles of GAAP the revenue recognition principle governs when revenue should be recorded. However, I can't find anything in regards to voiding checks. Does the check need to be voided in the period it was written in or can it be voided in another period. I really need some factual info to explain to my boss. Thank you!

 

[Southside Bean Counter]

I don't have a link or anything, but in my experience of 10+ years of accounting, a check can be voided in a different period that is was issued. I don't know what type of evidence you need to show your boss, but look at it logically. What if a check is issued on 2/25/2015. The vendor calls on 3/3/2015 and says they misplaced the check, and want a new check issued. You would first verify the original check had not been cashed at the bank, then you would void and reissue a new check.

 

[Julia T]

First Thank you for your response. I do see the logic there. I work for a financial accounting software developer. This is something we are trying to write into the program. So to be clear I want to make sure it is not unlawful to void in a different period?

 

[Counterofbeans]

No, it most certainly isn't unlawful to void a check in a period different that which it was written. As a matter of fact, I'd say the overwhelming majority of checks that get voided are in different periods.

Simply Dr. Cash, Cr. Accounts Payable and the world is a happy place.

 

[Julia T]

Ok great! Definitely on the right path. Do you have any advice as to the proper procedure voiding a check after the period has been closed? Really appreciate your help

 

[Southside Bean Counter]

Julia, here are the procedures - When you find out a check needs to be voided, you first check at the bank to ensure it has not been cashed. If the check HAS been cashed, you would provide the vendor with a copy of the cashed check, and be done with it. If the check IS still outstanding, you would void at the bank, and then void on your books. At the last place I worked at, we had checks generated from the payable system, and we also had manual checks. If the check was voided in the payable system, a new check would automatically reissue, so nothing else would need to be done. If a manual check was voided, I would have to do a journal entry to record the void on the book side (using the accounting Counterofbeans listed in his post above). Then, when/if a new check would be issued, you would do the opposite accounting, to record the expense, and reduce cash.

There is no special procedure that needs to be completed, simply because you are going into different periods. The expense is recorded when the check is issued. If the check is voided, the expense gets credited (gets the money back).

 

[Counterofbeans]

The expense is recorded when the check is issued. If the check is voided, the expense gets credited (gets the money back).

This isn't correct. The correct entry is to Dr Cash and Cr. A/P. If you later find that the expense is not needed, then you Dr AP and Cr Expense. Voided checks should not reduce expense

 

[Southside Bean Counter]

This isn't correct. The correct entry is to Dr Cash and Cr. A/P. If you later find that the expense is not needed, then you Dr AP and Cr Expense. Voided checks should not reduce expense

That's not how we recorded it. That doesn't make sense to me. If a check is voided, why would the expense still be needed? We didn't have an AP account though. We would issue the check by DR cash and CR expense.

 

[Counterofbeans]

Because a voided check has nothing to do with whether a liability has been incurred or not. I'm actually confused as to how you can even cut a check in any system without it going into Accounts Payable to begin with, but, I suppose I'm missing something...

In any case, unless you're working under cash-basis accounting (perhaps for tax purposes or something), the correct JE is to Dr. Cash, Cr. Accounts Payable.