When you void a check, QuickBooks:
- changes the original amount of the check to 0.00
- adds the text VOID: to the beginning of the Memo
- sets the cleared flag, Clr
When you’ve specified that your books are closed through a given date, in addition to performing the above steps, QuickBooks gives you the option of automatically adding reversing general journal entries so that accounting reports for the closed period are not affected.
A bill payment check is similar to a check, but it is actually a different transaction type. QuickBooks only provides the option to automatically reverse voided checks, not bill payment checks. Later in this article, we’ll describe how to manually make the reversing general journal entries when voiding a bill payment check from a closed period.
To see this process in action, first verify your Closing Date. You can find it by clicking on the Company->Set Closing Date… menu selection.
For our sample company, the Closing Date has been set to 11/30/2013. If you void any check dated on or before this date, QuickBooks will give you the option of automatically creating well-documented reversing general journal entries that will maintain the accuracy of your accounting reports for the closed period.
To void a check, you can either right click on the check in the bank account register to invoke the context menu and select Void Check or you can select the check in the register and choose Void Check from the Edit menu. Both paths take you to the same destination.
Since check # 5244 is dated before the Closing Date, voiding it will bring up this warning:
You have the option of simply voiding the check and not having QuickBooks create the reversing general journal entries. Just click the No, just void the check button. However, unless you manually create reversing general journal entries, financial reports from the closed period will no longer be accurate, since the check amount was just changed to 0.00. Even if you intend to modify the reversing general journal entries (such as to add more information to the Memo), it’s a good idea to click the Yes (Recommended) button.
Clicking the Yes (Recommended) button causes QuickBooks to automatically perform these steps:
- create a reconciled general journal entry on the date of the original check
- create a reconciled, reversing general journal entry on the date you voided the check
- add additional text to the Memo of the voided check to refer to the journal entries made
The general journal entry on the date of the original check:
The reversing general journal entry on the date the check was voided:
The updated memo on the voided check that refers to the general journal entries:
Note that QuickBooks automatically sets the Clr flag for both journal entries, just like it does for the voided check. By doing so, voiding the check and recording the reversing journal entries will not interfere with your bank reconciliation.
Recording these journal entries preserves the accuracy of your financial statements for the closed period. If you simply voided the check and didn’t record these entries, rent expense for the closed period would be lower than previously reported on your financial statements or tax returns. That inconsistency can lead to questions about the reliability of accounting information and cause time to be spent trying to reconcile the difference. Well-documented general journal entries eliminate the potential for inconsistency.
The reversing general journal entry puts a credit to rent expense in the current period. If you were voiding the original check because it was never cashed and you now plan to issue a replacement, the credit and the replacement check will offset. That way, your expenses (or the accounts on the original check) are not overstated in the current period. If you were voiding the check and you don’t plan to reissue it, expenses for a closed period were overstated, and they’ve been adjusted in the current period – when the overstatement was discovered.
QuickBooks did a lot of work once you clicked on the Yes (Recommended) button. But don’t forget that the entire process is triggered by setting your Closing Date. If you haven’t done that, QuickBooks won’t go through these time-saving steps because it lacks the information to do so.
For bill payment checks, QuickBooks won’t automatically perform the steps described above, so you’ll have to go through them manually when voiding a bill payment check in a closed period. Those steps are:
- void the bill payment check, noting the vendor; voiding the bill payment check will turn the bill into an outstanding A/P balance
- record a general journal entry on the date of the original bill payment check with the first line on the journal entry as a debit to accounts payable; record the vendor in the Name column on this line; the second line of the journal entry is a credit to the bank account from which the bill payment check was written
- record a general journal entry on the date the bill payment check was voided with the first line on the journal entry as a credit to accounts payable; record the vendor in the Name column on this line; the second line of the journal entry is a debit to the original bank account
- use the Vendors->Pay Bills function to use the older general journal entry to pay the original bill
- pay the newer general journal entry in the normal course of business
It’s important to note that the procedures described here cover voiding – but not re-issuing – a check. If you need to re-issue a check, you’ll have to do so in the current accounting period. Voiding a bill payment check leaves a current accounts payable balance for you to pay in the current period. If you want to void a bill payment check in a closed period and cancel the original bill, you’ll need to record a bill credit in addition to the steps outlined above.
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Thanks. It is helpful. I will follow this way.
Chief Mechanic,
Can I void a bill payment check like this:
Don’t void the check in a closed period. But make notes.
Make a reversing deposit in current period.
Enter a replacement bill in current period. (If the original bill is canceled, don’t need to enter the replacement.)
Pay the new bill in the future.
Thanks.
I wouldn’t do it exactly as you described, but you’re suggestion is pretty close. You could: 1) don’t void the check in the closed period but make notes (as you wrote), 2) make a general journal entry with a credit to the bill’s expense account and a debit to the bank account on which you wrote the bill payment check; I would not use a deposit, as you suggested, 3) enter a replacement bill, 4) pay the replacement bill in the future. The key difference is to use a general journal entry as opposed to a deposit, and be sure to take advantage of the Memo field to describe why you’re recording the general journal entry. This highlights that in accounting, as in QuickBooks, there is often more than 1 method to achieve the same goal, sometimes with little advantage from one method to the next.
I followed your directions here for voiding a bill payment check from a closed period and reissuing a new check. However, the vendor account now has a credit balance in the amount of the voided check. My BS accounts payable and bank account balance checks out but I cannot clear this credit balance.
Thank in advance.
John – Just to clarify, you did note that the steps for voiding a bill payment check – which is different from a regular check – are at the bottom of the post? Can you relate what steps you performed, even using dummy names and amounts? If you followed those steps, you should observe the following: 1) after this step, your vendor has a balance, since you just voided the bill payment check, 2) after this step, the vendor’s balance as of the closed period is back to $0 (assuming no other transactions), 3) after this step, your vendor is owed the original balance as of the date you voided the bill payment check, 4) after this step, the original vendor bill and the 1st general journal entry are matched, so they will no longer appear on A/P reports, and finally 5) after this step, your vendor’s balance should be back to the level before you voided the bill payment check.
Try following the transaction after each step and let us know where the breakdown occurs.