Wednesday, March 27, 2013

QuickBooks: Voiding Checks



“I just started working for a new employer and found that there were a few outstanding checks. In doing the research, I found that one was written on the wrong checking account, one had been “chewed up” in the printer and was reissued and one was just never going to be sent. I would like to get them out of the system and don’t know the best practice. Can you help me?”

Once a check has been recorded in QuickBooks, it is necessary to void it – not delete it. There are alternatives for voiding a check or bill payment depending on the timing.  The options:


1.      Voiding the check immediately, as soon as a problem is discovered.
2.      Voiding an older check (or bill payment) – in a different accounting period
3.      Voiding checks so the net effect is recorded in the current year (use with extreme caution)

Voiding Checks – Option 1

If a check or bill payment needs to be voided immediately, simply open the check or bill payment, and from the menu bar at the top, choose Edit > Void Check/Bill Payment.  The check is voided as of the original transaction date. 

If the transaction is a bill payment, voiding the payment will only void the payment portion of the transaction.  The bills will then be available to be paid again.  If the bills need to be voided, they will need to be handled as an additional step.

Voiding Checks – Option 2

If the check or bill payment is older, the void option does not work well since the transaction is voided as of the original transaction date, which affects a prior accounting period. 

Instead, enter a deposit with a current date, coded to the general ledger account that was used in the original transaction. When the next bank reconciliation is completed, place a check mark next to the deposit and next to the check.  The difference is zero so it will not affect the bank reconciliation in total, but both will be removed from future reports.

Voiding Checks – Option 3 (USE WITH CAUTION)

While the theory is great, in practical application, there are some significant issues that need to be addressed. What should happen when the original check is voided:  A journal entry is created with the original transaction date to adjust the General Ledger to what it was then and that entry is reversed with a current date to show the increase in the bank account in the appropriate period.

The theory of this approach makes Accountants very happy because voiding the check does not change the historical reports, most importantly, Retained Earnings.  Unfortunately, there are many limitations to how the process really works.

Issue #1:  Closed Period. This process is ONLY used by the software for voiding checks in a closed period.  If there is not an appropriate closing date entered any checks will be voided using the same procedures as option 2. It is critical that a closing date be entered and that it is updated as each period is reconciled and should be locked from future changes.

Issue #2:  Expense Only.  This process is ONLY used by the software for checks that have been entered and coded to an expense account. Any transactions coded to a Balance Sheet account will be voided using the same procedures option 2.

Issue #3:  Check type transactions.  This process is ONLY used by the software for checks, not for bill payments.  Bill payments are still handled using the same procedures as option 2.




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