A cheque is a document that orders a bank to pay a specific amount of money from a person’s account to anther person whose name on the cheque.

The person writing the cheque is known as the drawer, and the person receiving the cheque is known as the payee. Cheques are typically used to pay for goods and services or to withdraw money from an account.

In order to write a cheque, the drawer must have sufficient funds in their account to cover the amount of the cheque. Once the cheque is written, it can be cashed at a bank or deposited into an account. Cheques are also used to make payments by mail or courier.

When making a payment by cheque, the payee fills in the correct amount of money and signs the back of the cheque. The payee then sends the cheque to the drawer, who will then need to sign it and submit it for payment.

A cheque is usually negligence if it is not presented to the bank within a reasonable time after it was received, typically 30 days.

However, some banks may consider a cheque unpresented if it is not presented within six months. If a drawer suspects that their cheque has been lost or stolen, they should inform their bank as soon as possible so that the funds can be frozen and the cheque cancelled.

If a cheque is returned unpaid, the drawer will typically be charged a fee by their bank. Cheques can also be dishonored for other reasons, such as insufficient funds or if the signature does not match the one on file with the bank.

Journal Entry

The company usually issue cheque to settle the accounts payable with the supplier. The entry will reduce cash amount and accounts payable from the balance sheet.

However, when the cheque is not present at the bank, cash at bank is not transfer to the payee (supplier). So company need to reverse the transaction by increasing cash and accounts payable.

Impact of Unpresented Cheque

An unpresented cheque is a cheque that has been written but not yet presented for payment. When a company writes a cheque to pay for goods or services, the cheque is typically recorded as an decrease of accounts payable on the company’s balance sheet. The cheque is then presented to the bank for payment and the funds are transferred from the company’s account to the vendor’s account. If a cheque is not presented for payment within a certain timeframe, it is considered an unpresented cheque.

Unpresented cheques can have a negative impact on a company’s financial statements.

First, the outstanding accounts payable will remain the same until the cheque is presented at the bank. This can make it look like the company is not paying its bills in a timely manner.

Second, if the vendor refuses to accept the late payment, the company may be required to write off the amount of the cheque as bad debt.

Finally, if many unpresented cheques are outstanding, it can signal to investors that the company is having cash flow problems.

Unpresented cheques can be a problem for companies, but there are ways to manage them.

One way is to keep track of when each cheque is written and make sure it is presented for payment within the required timeframe.

Another way is to establish lines of credit with vendors so that late payments do not result in bounced cheques.

Finally, companies can work with their banks to set up systems that automatically present cheques for payment when they reach a certain age. By taking these steps, companies can minimize the negative impact of unpresented cheques on their financial statements.

Conclusion

A unpresented cheque is a cheque that a business has written, but which has not yet been presented to the bank for payment. When a business writes a cheque, the accounting records are updated to reflect the outgoing payment: the cash balance is reduced, and accounts payable are increased. However, until the cheque is presented at the bank, the payment has not actually been made.

Unpresented cheques can therefore create a temporary discrepancy between the cash balance reported in the accounting records and the actual amount of cash available. This can be an issue if the business needs to make further payments before the cheque is presented and cleared. In such cases, businesses may need to arrange for a short-term loan to cover the shortfall in cash. Once the cheque is presented and clears, the loan can be repaid and the accounting records reconciled.

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