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

How voiding a Pseudo Check affects my Bank Reconciliation

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:

Pseudo Check and Pseudo Check Void: Affects on General Ledger 

Check:  Debit Cash, Credit Cash

Voiding Journal Entry: Debit Cash, Credit Cash

General Ledger Balanced

 

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

Pseudo Check and Pseudo Check Void: Affects on the Bank Reconciliation

Check: Credit Cash

Voiding Journal Entry: Debit Cash, Credit Cash

Bank Reconciliation Not Balanced

 

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

 

Therefore, instead of voiding the Pseudo Check, you will use a reversing journal entry which debits checking and credits a different account to reverse the ORIGINAL transaction (originally created in the prior software). Then, you can mark the original check and the journal entry on the bank reconciliation and it will balance.

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. 

Original Check in prior software (this is already part of your beginning balance)

Debit Expense Account

Credit Cash

Accounted for in beginning balance entries, both entries affect the GL

 

 

Reversing Journal Entry

Debit Cash  only this part shows on the Bank Reconciliation

Credit Expense (or Net Asset Account to which the expense belongs)

Both entries affect the General Ledger

 

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.

 

 

 

Have more questions? Submit a request

Comments

0 comments

Please sign in to leave a comment.