7 1.57 Outstanding Checks Illinois State University

Most banks will continue to honor checks for the full 180 days, but that isn’t guaranteed. To prevent problems, you should cash or deposit a check promptly after receiving it. It may be necessary to issue a new check without getting the old check back if the original check was lost or destroyed. This presents a thorny situation—two checks might be circulating for a single payment.

To reconcile outstanding checks with your bank statement, compare the checks issued but not yet cleared with the information provided on the statement, ensuring that both records align. On your reconciliation sheet, outstanding checks are often subtracted from your balance per bank because these withdrawals have not yet happened but are simply a timing matter. Interest income reported on the bank statement has usually not been accrued by the company and, therefore, must be added to the company’s book balance on the bank reconciliation. The final transaction listed on the Vector Management Group’s bank statement is for $18 in interest that has not been accrued, so this amount is added to the right side of the following bank reconciliation. This is why your (or company) bank accounts need to be reconciled with the bank statement. There is a discrepancy between what your checkbook or accounting system says you have in your account and what the bank reports on your monthly statement.

Company

Since outstanding checks have already been recorded in the company’s books as cash disbursements, they must be subtracted from the bank statement balance. A check previously recorded as part of a deposit may bounce because there are not sufficient funds in the issuer’s checking account. When this happens, the bank returns the check to the depositor and deducts the check amount from the depositor’s account Therefore, NSF checks must be subtracted from the company’s book balance on the bank reconciliation. The Vector Management Group’s bank statement includes an NSF check for $345 from Hosta, Inc. Oftentimes, a check may have been written by a company, recorded in the general ledger, but not yet shown on the company’s bank account statement. Because reconciling items that affect the book balance on a bank reconciliation have not been recorded in the company’s books, they must be journalized and posted to the general ledger accounts.

• The payee may cash the check immediately or might hold onto it for months.
• The payee cannot cash or deposit the check once a stop payment has been issued.The payer’s bank has no way of knowing that a check has been written until the payee deposits or cashes the check.
• As mentioned above, you may need to return the original check or sign documents confirming the check is lost or destroyed.
• Huntington explains how you can add a person to your account at any time or open a joint bank account together.
• With banking activity becoming increasingly electronic, another way to avoid writing a check and forgetting about it is to use the checking account’s online bill pay service.

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. 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. Balancing your checkbook is akin to what professional accountants do during reconciliation. It’s a way of making sure that you and outstanding checks your bank agree about your account balance and available funds. It can be tricky to balance a checkbook and we have a worksheet with step-by-step instructions to help you. This database consists of outstanding state-issued checks that are over two (2) years old and provides payees with information to assist them with requesting a replacement check from the issuing agency.

Outstanding Checks Issued to You

If an outstanding check is cashed after you asked a bank to stop the payment, you will be responsible for proving that you took the necessary steps to complete the payment. There are actually some benefits to have checks outstanding as well, though. Writing checks makes it possible for organizations and individuals to make payments without requiring instantaneous cash or electronic transactions to be completed. Checks that linger only buy the company more time to gather up enough resources for payment to clear if more time is needed. Checks that remain outstanding for long periods of time cannot be cashed as they become void. Some checks become stale if dated after 60 or 90 days, while others become void after six months.

Therefore, from the bank’s perspective, the terms debit and credit are correctly applied to the memoranda. If this still seems confusing, you may want to review the chart on page 19 and think about how the company classifies their account as an asset while the bank classifies the company’s account as a liability. An outstanding check is a check that has been written by the company and send to a vendor, however, the vendor has not yet received or not yet deposited the check. Since the company mailed the check, they would have credited cash, but the bank would not process the check until the customer deposits the check. Outstanding checks should be subtracted from the balance per bank statement. For example, a check may have been written and recorded by a company on December 31.

How Do I Reconcile Outstanding Checks with My Bank Statement?

The $1,565 credit memorandum requires a compound journal entry involving four accounts. Cash is debited for $1,565, bank fees expense is debited for $25, notes receivable is credited for $1,500, and interest revenue is credited for $90. Banks use debit memoranda to notify companies about automatic withdrawals, and they use credit memoranda to notify companies about automatic deposits. To the bank, however, a company’s checking account balance is a liability rather than an asset.

• These non-editable fields display the bank abbreviation and description,
  currency, fiscal year, and period that were selected in the main inquiry
  screen.
• The final transaction listed on the Vector Management Group’s bank statement is for $18 in interest that has not been accrued, so this amount is added to the right side of the following bank reconciliation.
• This is very important because your bank balance will be higher than your available funds until the check clears the bank.
• Therefore, rather than allowing checks to become stale and then remitting the amounts to a state government, companies should contact the payees of any checks that have been outstanding for several months.

The payor must be sure to keep enough money in the account to cover the amount of the outstanding check until it is cashed, which could take weeks or sometimes even months. Checks issued from Radford University that have not been cashed within three months of the issue date are considered outstanding. Due diligence procedures performed at this time include sending a written reminder to the payee giving him the option of either cashing the check or requesting  a replacement check if it has been lost or stolen.

OUTSTANDING CHECKS

If the old check is deposited, your bank might honor it, and you could consequently end up paying double. You can also call or write to remind the payee that the check is outstanding. If they haven’t received the payment, this may nudge them to notify you to reissue the check. Last, outstanding checks might have an impact on management of the cash flow.

• Therefore, company records may include a number of checks that do not appear on the bank statement.
• After that, there are a few more steps you can take to track down an old check.
• The payment goes on the general ledger, but businesses must make adjustments during reconciliation, and they may need to reissue stale checks.
• This can help prevent any unnecessary NSFs if the payee decides to cash the check at a later date.
• The Treasurer’s Office continues to hold the funds pending issuance of replacement checks.
• If an outstanding check is cashed after you asked a bank to stop the payment, you will be responsible for proving that you took the necessary steps to complete the payment.
• An outstanding check is a check that has been written by the company and send to a vendor, however, the vendor has not yet received or not yet deposited the check.

When you open the Outstanding Checks subtask, all detail transactions
that qualify automatically fill the table window. The Count display
in the menu bar indicates the total number of detail transactions. You
can use the Subquery function from the menu bar to select parameters for
viewing a subset of the detail records, if desired. Please note that by law we are required to issue replacement checks in the name of the original payee(s) only. If a check is destroyed or never deposited, the money remains in the payer’s account.