In our previous post #80 Bank Reconciliation Review- Unpresented Cheque, we posted the following example and question:
Susan is the accountant of Company ABC, who has a December year-end. On 31 December 2008, Susan has approved a few cheques payable to their creditors, amounted to US$200k. Account executive has input the payments into the systems after Susan has approved the cheques. However, the cheques payable to their creditors are not delivered to their creditors until after year-end.
Is there any financial impact to the financial of the Company? Yes or No? If yes, what would be the impact then ?
Apparently, cheques are dated before 31 December 2008 while the cheques are only delivered to the supplier after year-end. Susan has posted the following entries and recorded in 2008's book:
Dr. Trade Creditors
From accounting point of view, cheque should not be deducted from the above cash account until cheques have been delivered to the supplier. In above example, cash and trade creditors balance have been understated. A re-classification entries should be reversed out.
We should inquire our clients that there are no cheques not delivered to supplier as at balance sheet date.