Unpresented Cheques.

[Jean-David Beyer]

Phil White wrote:
> Is anyone with a knowledge of accountancy principles able able to help with 
> the following?
> 
> I have been having problems lately keeping tabs on cheques. I have a separate 
> ASSETS account for received cheques awaiting payment into my bank account, 
> but now I have the reverse problem:
> 
> I have issued a number of cheques. Some have since gone stale, and are, I 
> assume, forgotten about. The rest will get presented eventually, but are 
> annoying in that tracking them is irritating. I just havn't developed a 
> system that I seem to like yet! ;-)
> 
> So, a theoretical question. Once I have issued a cheque, where is the money?
> Because it hasn't been presented, the funds are still in my account - but 
> technically it is no longer MY asset, but theirs. Should I track it as a 
> liability, or a debt? And at the end of a financial year, how should I go 
> about clearing this item, and re-enter it into my asset tables?
> 
It depends on how you choose to think about it, and what your bank's 
policy is.

What I do is enter the check when it is written (i.e., the date on the 
check that the banks, in practice, ignore). From that moment on, it is 
not my money, but it is in the account gaining me a pittance of 
interest. If I took the trouble, I could even calculate what my monthly 
interest should be before the bank tells me. But I cannot bear it, so I 
accept the pittance which I credit each time I get my bank statement.

Now the check just sits there, and is not confirmed in the 
reconciliation statement until it actually appears on a bank statement. 
I have one check that has been outstanding for over three years, and it 
is for a considerable (over US$100) sum. The creditor for some reason 
chooses not to cash it; if he lost it, he has not seen fit to request 
another, and his telephone number and post-office box do not work, so I 
cannot force him to take the money for services actually rendered. I 
must be making $0.50/year in interest off him.

Now my bank will not honor stale checks. IIRC, they are stale after they 
are over 6 months old, though some banks consider them stale after three 
months. I would not like to assume a bank can be relied upon to keep to 
this, though. I have accidently deposited post-dated checks before their 
dates, and they clear just fine ahead of time. So banks clearly do not 
honor the date written on the checks. They also do not verify the 
signatures now that account numbers are printed on the checks. I suppose 
if you repudiated the signature, they would check, but not otherwise.

-- 
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