A credit memorandum attached to the Vector Management Group’s bank statement describes the bank’s collection of a $1,500 note receivable along with $90 in interest. The bank deducted Outstanding Check List $25 for this service, so the automatic deposit was for $1,565. The bank statement also includes a debit memorandum describing a $253 automatic withdrawal for a utility payment.

• Usually, you will print this report as part of your bank reconciliation before you begin clearing checks.
• An outstanding check is a check payment that has been recorded by the issuing entity, but which has not yet cleared its bank account as a deduction from its cash balance.
• The bank statement also includes a debit memorandum describing a $253 automatic withdrawal for a utility payment.
• The check may also be delayed if the issuing entity puts off mailing the check for any reason.
• Outstanding checks that remain so for a long period of time are known as stale checks.
• Document your adjustments to remove aged outstanding checks.
• If you use a payroll service, verify that the outside paying agency properly reports uncashed checks on your behalf.

You can select to show this period or a selected period. The Huntington National Bank is an Equal Housing Lender and Member FDIC. ®, Huntington®,Huntington.Welcome.® and Huntington Heads Up® are federally registered service marks of Huntington Bancshares Incorporated. Harold Averkamp has worked as a university accounting instructor, accountant, and consultant for more than 25 years. He is the sole author of all the materials on AccountingCoach.com.

What to Do About an Outstanding Check

Since outstanding checks have already been recorded in the company’s books as cash disbursements, they must be subtracted from the bank statement balance. When a business writes a check, it deducts the amount from the appropriate general ledger cash account. If the funds have not been withdrawn or cashed by the payee, the company’s bank account will be overstated and have a larger balance than the general ledger entry. A common problem for the payer is keeping sufficient cash in a bank account to pay off all outstanding checks, since a few residual checks may not be cashed for a long time . A check previously recorded as part of a deposit may bounce because there are not sufficient funds in the issuer’s checking account. The Vector Management Group’s bank statement includes an NSF check for $345 from Hosta, Inc.

As businesses have to abide by the unclaimed property laws, any checks that have been outstanding for a long time must be remitted to the state as unclaimed property. Checks that remain outstanding for long periods of time cannot be cashed as they become void. Some https://bookkeeping-reviews.com/ checks become stale if dated after 60 or 90 days, while others become void after six months. Although separate journal entries for each expense can be made, it is simpler to combine them, so bank fees expense is debited for $70 and cash is credited for $70.

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This may present the false notion that there is more money in the account available to be spent than there should be. If the payor spends some or all of the money that should have been held in reserve to cover the check and then said check is later cleared, the account ends up in the red. When this happens, the payor will be charged an overdraft or non-sufficient funds fee by the bank, unless the account has overdraft protection. Individuals need to account for outstanding checks when they balance their checkbooks.