Resolving uncleared QuickBooks checks during a bank reconciliation.
Preparing a QuickBooks bank reconciliation is an important part of your month end financial tasks.
Identifying the reason for uncleared QuickBooks checks and deposits is just as important as reconciling to a zero difference.
After you have reconciled to zero, identify why uncleared checks, debits, or deposits still remain uncleared. This step is very important for the following reasons. Otherwise, these uncleared checks, debits, and deposit items that will never clear can:
- Distort your cash balance in your checking account
- Show incorrect net profit or loss of your business
QuickBooks balance sheet and profit & loss report will change when you void or delete any uncleared check or deposit. This change occurs on the date the check or deposit was originally posted. If that date was in a closed period, it will change your financial statements. For this reason, see steps below to correct uncleared checks or deposits.
When is an accounting period for a bank reconciliation considered closed?
A closing date can be set in QuickBooks from the company menu > set closing date. If the uncleared QuickBooks check or deposit was written prior to the closing date, consider the period closed. The period is closed if you delivered financial reports that included the uncleared check or deposit to any of these key individuals to your organization:
- The business owner
- Board of directors
- Your bank
- Other outside parties
You do not want the financial reports to change. If you void or delete an uncleared check or deposit transaction that falls within the published reports – date range – the void/delete will change the profit & loss or retained earnings. These changes can make an accountant and other financial readers of the statements unhappy.
Take these steps to decide why QuickBooks checks remain uncleared
First, check for duplicate entries in QuickBooks
- Go to Edit menu and select Find | Advanced.
- Click on the filter for the amount and enter the amount of the uncleared QuickBooks check. Then, click on search to identify if this is a duplicate entry which can be deemed Erroneous-Entered In Error.
- Next, Click the Reset button in the Find window.
- Go to Edit | Find | Advanced and click the filter on the name and enter the name of the payee on the check and search through the transactions to determine if the payment was included on another check that was issued and cashed. OR, look in the vendor center under the vendor record to see if you can identify whether a duplicate payment had been made.
Furthermore, there may be other reasons attributed to uncleared QuickBooks checks
- Is this an uncleared item for a service or product that was never rendered or delivered?
- Did a payee on an uncleared QuickBooks check die, move away to an unknown address, or lose the check? See below for the topic on escheatment.
- Has the bank made an error in clearing the check for the payee?
A quick method to void an uncleared check and allow you to finish the bank reconciliation.
When uncleared QuickBooks checks are posted to an expense account for a period that was officially closed within QuickBooks (company menu > set a closing date – you can begin to see the advantages of closing your books after each QuickBooks bank rec):
- QuickBooks will allow you to void the check in the current period and create the journal entries to keep prior reports accurate.
- Beware- this will only work if the check was posted to an expense account. It will not work if a non-expense account in the chart of account was selected on the QuickBooks Check or the transaction used an item rather than a chart of account,
Second, resolve uncleared checks and deposits – A better alternative
After reaching a zero discrepancy in your bank rec, handle the uncleared QuickBooks checks, debits, and deposits transactions that will never clear as follows:
Here are the steps:
- Open the original check /deposit- on the Memo lines (both) write “this check voided xx/xx/xxxx and replaced with check #xxxx”.
- For voiding checks:
Create a journal entry to debit the bank account and credit the expense the original check was posted to (if the check was a bill payment check, post the journal entry to the account used on the bill.
- For voiding deposits:
Create a journal entry to credit the bank account and debit either account receivable with the customer name or an income account using the income account the original deposit/invoice was coded to.
- Journal entries can be found under the Company menu.
- If you plan on reissuing any checks, create new QuickBooks checks and print, post to the same account used on the Credit line of the journal entry in 2 above. In the Memo field write “replace check #xxxx original dated xx/xx/xxxx”.
- Return to the bank reconciliation window and clear both the journal entry and uncleared QuickBooks checks or deposit transaction.
Is your company subject to Escheatment rules in your state?
Your state government wants you to treat uncleared checks as unclaimed property, turning the money over to them. That’s right, the technical term is called escheatment. If the state were to audit your company, an auditor may ask for a list of voided checks. If you void checks, keep the voided paper check in your tax documents folder (or scan it). For transactions voided in QuickBooks – keep the paper voided check(s) (if available) and any further documentation that will explain the story. If the check was issued in error, it is not required to be paid to the state.
For more information about escheatment rules in your state, google the keywords “Your State + Reporting unclaimed property + holder packet”. You should find a website that will provide instructions on how to submit the funds to your state as unclaimed property along with instructions and more information. If the uncleared QuickBooks checks are truly valid, still uncleared and unlikely to every clear, then most likely, you have to make a payment to your state.
No escheatment reporting and resolve uncleared checks
To avoid dealing with escheatment reporting, it is in your best interest, when a QuickBooks check remains uncleared for two consecutive months, call the payee to find out why. If you need assistance with correcting this in QuickBooks, we offer QuickBooks support. Call 800-216-0763 for more information.
Finally, reissue any uncleared QuickBooks checks
- When you need to reissue the check, and do not want to change the books and records follow steps above to replace the uncleared check. (edit original check with memo, create a Journal entry in the current period, create and print a new check).
- Another option would be to mark that same check To Be Printed again and reprint with a new check number, leaving the date in the same period. In your
Voided Check folder, write down on a piece of paper, the original check number, payee and date – and put a reason for the void “payee never received – reissued with check number xxxx”Consider putting a stop payment order with your bank to ensure that should the payee later find the missing check he/she would be unable to cash it.
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