CNA L&P - Bank Reconciliation: How voiding a Pseudo Check affects my Bank Reconciliation

How voiding a Pseudo Check affects my Bank Reconciliation and what to do about it

A Pseudo check is a check that is created to document a check which was written in a prior accounting system and where the credit to the bank account and debit to expenses is already included in the startup balances.

The reason the Pseudo check is created is to allow you to mark each check as it shows up on your bank statement and still allow the bank reconciliation to balance. The pseudo check does not affect the general ledger.

The Pseudo check will debit and credit the same (checking) general ledger account. The debit and credit wash each other out but they provide an entry on the bank reconciliation.  When the check is cashed and appears on your bank statement, you will clear the check on the bank reconciliation. However, the bank reconciliation registers only the credit part of the entry.

If the check is never cashed and you need to void the transaction, DO NOT VOID THE PSEUDO CHECK. Voiding a pseudo check creates a Journal Entry which debits and credits the same (checking) general ledger account (just as the original pseudo check did) but the difference is the Bank Reconciliation Voiding Journal Entry registers both the Debit and the Credit.

Here is how a Pseudo Check and a Pseudo Check Void (using the void button) affect your General Ledger:

 

Here is how a Pseudo check and a Pseudo Check Void are registered on your Bank Reconciliation:

 

 

You can see how the void adversely affects the Bank Reconciliation.

The issue here is that the check had already been recorded in the books with beginning balances. The pseudo check was only created as a placeholder to mark when the Bank Statement came through. Voiding the check does not reverse the original check which came from the prior system, but that is what you need it to do.

To reverse a Pseudo Check through a Journal Entry

The journal entry needs to Debit the Bank Account and Credit the Original Expense Account or Net Asset Account. 

To create the affect of this true reversal, if you already voided a pseudo check, you must edit the Journal Entry and change the Credit Entry from the Bank Account to the original Expense Account or Net Asset Account (please consult with your finance committee or accountant regarding which account to use). If you haven't voided the pseudo check, you may enter a reversing journal entry without voiding the pseudo check. Just make sure it follows these guidelines. 

Now, only the Debit side of the journal entry will display on the Bank Reconciliation, because that is the only side that now affects the Bank Account. Marking both of these entries will have a wash affect on the Bank Reconciliation.

 

 

 

 

Not only does the Reversing Journal Entry allow you to balance your Bank Reconciliation, but it also updates your books according to what really happened. If that original check, written in the prior software debited an expense and now you are removing the entry, it only makes sense to credit the same expense.

 

 

 

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