Lost or stolen cheque’s are valid while they haven’t formally been cancelled through your banking institution. If you no longer physically hold the cheque(check) or it hasn’t been destroyed, then there may always be a risk that it can be deposited maliciously or otherwise. This may occur even after you have re-issued another cheque in replacement for your supplier. A supplier won’t necessarily check to see if you have already paid them. You need to cancel the cheque to be sure by notifying your banking institution (bank fees may apply).
If you have already claimed the expense in a Tax filing/return then you can’t just delete the transaction. You will need to use a method which will make an adjustment to your next accounting period which will reverse any tax claimed previously.
Cancelling a cheque payment if the cheque was in a previous tax period
This General Journal example is reversing the original cheque issued. Thus ensuring your next tax remittance includes a ‘reversal’ of the previous GST credit. It also allows you to clear the undrawn cheque from your bank reconciliation.
| DEBIT | Choose the Bank Account you issued the cheque from. Don’t select any tax code. |
| CREDIT | Choose the Account you previously used when the original cheque was created. Select the same tax code as the original expenditure transaction or use a reversing tax code relevant for your Zone. |
FAQ’s
Why can’t I just delete the transaction?
Deleting any transaction means you have no record of the transaction. In this case a cancelled cheque. So there are audit and business issues in doing this.
How long should I wait before cancelling a cheque?
Any lost or misplaced undeposited cheque is risky. You may be vulnerable to fraud such as revealing your signature or leaving open the possibility of a copy or counterfeit cheque being created in it’s place(each cheque has a unique number series). So it’s a good idea to review uncleared cheques at financial year end or better still at the end of your regular accounting period to see whether you can clean up.
