Years ago when a check appeared on the bank reconciliation's list of outstanding checks for a lengthy period the answer was easy:

  1. Void the check and add the amount to your checkbook balance.

  2. Debit the general ledger Cash account for the amount, and credit the account that was originally debited.

  3. Remove the check from the bank reconciliation's list of outstanding checks.

Today, the answer is different for U.S. companies as states are now likely to have unclaimed property laws. For example, in my state a check issued to a vendor, but has not cleared the bank on which it is drawn, must be reported to the state after five years. In other words, you will now have to report a liability until the amount is remitted to your state.

Since you wrote the check  and intended for it to be paid from the money in your checking, why not contact the payee as soon as the check is outstanding for 30 days? You may learn that the payee did not receive the check, had misplaced it, etc. Why not help your vendor the way you would want to be helped by your customers?

In short, communicate with the payees of your outstanding checks and eliminate the need for reporting and remitting to your state government many years after the original transactions.

To learn more, see the Related Topics listed below: