How do I write off old outstanding checks?

Definition of an Old Outstanding Check

We will assume that an outstanding check has appeared on the outstanding check list that is part of the company's bank reconciliation for at least four months. In other words, the company issued the check more than four months earlier and the check has not yet cleared the company's bank account.

Example of Writing Off an Old Outstanding Check

On January 22, a company issued a check for $124 for a business expense. As of June 30, the check has not cleared the company's bank account. Since the company owed the payee $124, the company should contact the the payee to cash the check. (If the check is not cashed within a certain number of years, the company will have to remit the amount of the uncashed check to its state government as unclaimed property.)

If the payee says the check was never received, the company should issue a replacement check for $124 and send it to the payee. The replacement check for $124 should be credited to the company's general ledger Cash account and also debited to the same Cash account since the original check is being eliminated.

The best practice is to communicate with the payees of your outstanding checks before the checks have been outstanding for a second month. This may eliminate the accounting entries and the need to report and remit the outstanding check amounts to your state government years later.

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