What entries would the bookkeeper have made ie the cheque is not presented for payment by the payee?
If a cheque is not presented for payment by the payee, there are a few entries that the bookkeeper would typically make. To understand these entries, it's important to know the basic concepts of accounting and the double-entry bookkeeping system.
1. Initial Entry:
When a cheque is issued, the bookkeeper records the payment in the company's books. This is typically done by debiting (increasing) the expense or accounts payable account and crediting (decreasing) the bank account.
For example:
Debit: Expense or Accounts Payable
Credit: Bank
2. Dishonored Cheque Entry:
If the cheque is not presented for payment or is dishonored by the bank, the bookkeeper needs to make the necessary entries to reflect this. This process usually involves reversing the initial entry made when the cheque was issued.
a. Reversing the Initial Entry:
The bookkeeper would reverse the initial entry by debiting (decreasing) the bank account and crediting (increasing) the expense or accounts payable account.
For example:
Debit: Bank
Credit: Expense or Accounts Payable
b. Recording Bank Charges:
When a cheque bounces or is dishonored, the bank may charge fees or penalties. The bookkeeper needs to record these bank charges separately. This is typically done by debiting (increasing) the expense account and crediting (decreasing) the bank account.
For example:
Debit: Expense
Credit: Bank
By following these entries, the bookkeeper accurately reflects the fact that the cheque was not presented for payment and also records any associated bank charges. However, it's worth noting that the exact entries may vary depending on the specific accounting system or practices followed by the organization.