Best way to handle checks issued but never cashed?

[Michael McKay]

Most countries have a payment association or some other agency to regulate
payments.  In Canada, there is the Canadian Payments Association (CPA).  The
CPA establishes and regulates the system of exchanges of payments and
defines the rules related to how payments should be handled by the
institutions.

The CPA website FAQ states the following:

When is a cheque considered stale-dated, and is it no longer valid after
that point?

Under CPA Rule A4, Section 21, a cheque is considered stale-dated after six
months, unless it has been certified. Although it may be returned through
the clearing for that reason, there is no obligation to do so, and the
payor's financial institution may still accept it as a valid payment item.
An institution accepting a cheque that is dated more than six months earlier
may choose to contact the payor's financial institution to confirm whether
the cheque will still be accepted.

In GNU Cash, you can:

1. Just delete the entries.  This is the simplest solution and will remove
all records of the payments being made.

2. Set the payment amount to zero and change the memo or description to
indicate that the check was voided.  This keeps a record of the cheque in
the system in case the payee asks about it. In that case where the check is
processed, you can easily correct the entry.

3. Add a reversing transaction to remove the effect of the entry at some
later date and clear both transactions.  This is good approach if you have
"closed" prior years but it leaves the impression that the cheque was cashed
which is false.

4. If you have a more complex situation with bills and payments, then you
may need to also adjust the accounts to show the bill as paid but the
payment not collected.  This would look like an allowance for uncollected
payments in accounts payable similar to an allowance for bad accounts in the
accounts receivable.  In this case, you would change the payment in accounts
payable to the allowance account and delete or void the entry in the
checking account.



Yours,

Michael McKay
MJM Consulting
613.724.8169


-----Original Message-----
From: gnucash-user-bounces at gnucash.org
[mailto:gnucash-user-bounces at gnucash.org] On Behalf Of Marc Evans
Sent: May-11-09 7:18 AM
To: gnucash-user at gnucash.org
Subject: Best way to handle checks issued but never cashed?

Hello,

I have been using gnucash for several years. During that time I have
issued several (about 8) checks that the people to which they were
issued have never cashed them. These are usually more than 2 years old,
and hence I do not expect that they ever will be cashed. They are small,
adding up to maybe $200 in total. The question therefore is, what is the
best way to handle these in gnucash? For example, should I create a
special account and transfer them to this special account?

Thanks in advance for any advice.

- Marc
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