How do I deal with uncleared cheques at the end of the year?

You may need to make an adjustment for uncleared cheques at year-end when accounting on an Accruals basis. For accounts produced on a receipts and payments (cash) basis, please see the paragraph at the end of this article.

An uncleared cheque is a cheque issued and dated before your year-end but not yet banked by the recipient. Many organisations no longer make payment by cheque as payment via online banking has become the norm. If your organisation does still make payments by cheque, then, you first need to determine whether the amount of the cheque is of a large enough value to require an end-of-year adjustment to be made. 

Do I need to make an adjustment for an uncleared cheque?

Whether or not you need to make an adjustment is dependent on (a) the value of the cheque and (b) the threshold value over which a transaction is considered to be 'material'.

Learn more about materiality in charity accounting in this blog article.

Here is an exert from Charities Commission guidance:

“An item is material if its inclusion or exclusion from the accounts would be likely to change a reader’s view about the accounts. Normally the larger the item the more material it is likely to be.”

So at what point is a cheque of 'material value'? This will be different for different-sized charities, for example, you may set the material value transaction threshold at £500 for your organisation, and any amounts above this value you would adjust for in your year-end accounts. 

Therefore, do you need to adjust for a £90 cheque written in one financial year, but that doesn't get cashed until the next financial year? Probably not, as this will be below the material value set by your organisation. What about an £800 cheque? In this instance, you probably will need to unless you have set a higher material value threshold than this.

It is not so much the monetary value of the cheque that is significant but how this relates as a proportion of your organisation's income and expenditure. For example, a single £800 cheque out of a £1m budget is not likely to be regarded as material (0.08%), but if you had uncleared cheques totalling greater sums, the aggregate total would start to have a material bearing on your accounts. Equally, if you had budgeted to spend £1,000 on an area of activity, but actually taking into account this £800 cheque you would've spent £1,500 by year-end, this could be regarded as a material difference to report on. 

In summary, typically most uncleared cheques will NOT need any adjustment in your year-end accounts. If you are unsure, you should ask your Independent Examiner.

How do I make an adjustment for uncleared cheques that do have material value?

In your accounts, where a transaction of material value is owed at year-end but not yet paid, an 'accounts payable adjustment' should be made within ExpensePlus.

See this article to learn how: How do I record my creditors manually? (Accounts Payable)

How do I deal with uncleared cheques adjusted for in the year prior to using ExpensePlus?

Where uncleared cheques have been adjusted for in your prior year accounts, the transaction has essentially been 'moved' from your current financial year (where the cheque will show on your bank statement) into your prior financial year (when the cheque has been written).

The result of this is that the expenditure for this transaction will have already been accounted for in your prior financial year AND your bank balance in your accounts will be lower than it was actually stated on your bank statement.

This means when setting up ExpensePlus for the first time:

(a) when you state your opening bank balances (setup step 1) you should use the lower amount stated in your accounts rather than the account balance shown on your bank statement (as ExpensePlus needs to match your accounts). Temporarily, just as on your year-end accounts, your bank statement balance for that account in ExpensePlus won't match your bank statement.

(b) you need to not upload (or even delete) this transaction when it appears on your bank statement (because it's been 'moved' and included in your prior financial year, so adding it in your current financial year would result in a duplication). If you are yet to upload the transaction, you can simply delete the line from the .csv / .xls bank statement download file before you upload this into ExpensePlus. If you have already uploaded it, on the view statement screen, click the 'unmatch' button to the right of the transaction, and click the 'delete' button that will appear to the right of the transaction.

Once you have done this for all uncleared cheques that have been adjusted for in the year prior to starting ExpensePlus, your closing bank balance amount in ExpensePlus will match your actual bank statement balance for the same date.

Note: If you have also made other adjustments to your bank statement in your year-end accounts (e.g. for cash received but not yet banked) then you will need to do the equivalent with these also.


Receipts and payments (cash) accounting

For cheques with a material value that have been written but not yet cashed or cleared at year-end, when accounting on a 'receipts an' basis, often an adjustment to the recorded bank balance (rather than an accounts payable adjustment) is made. Essentially, this adjustment 'moves' the bank transaction from when the cheque was cashed (in the new financial year) back to when the cheque was written (at the end of the previous financial year). 

To do this within ExpensePlus, if you have already uploaded and matched the bank transaction in question, you will need to:

  1. unmatch the bank transaction - on the view statement screen, click the 'unmatch' button to the right of the transaction in question;
  2. delete the bank transaction -  still on the view statement screen, click the 'delete' button to the right of the transaction that will then appear;
  3. re-add the bank transaction - click the 'upload transactions' button, select the 'upload manually' option and re-add the bank transaction but enter the date as the date the cheque was written rather than the date it left the bank account;
  4. re-match the bank transaction - click the 'match transactions' button and re-match this transaction (Note: the date of the payment on the right-hand table will automatically update when you match it, so there is no need to try and adjust this).

Note: if you are yet to upload the bank transaction, you can simply modify the date of the transaction in the .csv / .xls bank statement download file before you upload this into ExpensePlus.

To help you better understand the Adjustments module as a whole, please visit the module overview page here.

Did this answer your question? Thanks for the feedback There was a problem submitting your feedback. Please try again later.

Still need help? Send us a message Send us a message