PSA L&P - Checks: I voided a check that was written in a future year (Accrual) now expenses are inflated

I voided a check that was written in a future year (Accrual) now expenses are inflated

correcting_journal_entry_affects.png

This solution assumes a bill was written in one year and the subsequent check and void are dated one whole year later though the same solution could be used for any gap of time. These transactions are depicted on the left side of the image.

If you carefully look at the transactions depicted on the left in the image above you will note that the expense and the A/P accounts will be inflated for an entire year.

To fix this, create two journal entries.

  • The first will reverse the bill on the bill date. This cancels out the bill as if it were never entered.
  • The second will reverse the A/P line item on the check and the Expense line item on the void.

    [These journal entries are depicted on the right side of the image above. They are dated the same as the original check/void entries which were dated in error one year forward.]
  • The bank account line item in the check and the bank account line item in the void already cancel each other out, so they do not need to be addressed in the journal entry.

The arrows in the image point to each transaction that cancels out the other. For easier comprehension, each account is highlighted in its own color.

 

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