A check is outstanding when the drawer has written it and recorded it in the ledger but the payor bank has not yet paid it. Book cash is already down by the amount while the bank balance still holds it, and the check stays outstanding until it is paid, is voided with the liability put back to the payee, or is turned over to a state as unclaimed property. Payment releases the drawer, and so does that transfer to the state, but voiding does not, since it moves the amount off the check and back to the payee. The drawer is whoever signed the check, the payor bank is the bank it is drawn on, and checks outstanding and outstanding checks name the same item.
Why the Amount Is Still Owed
Delay does not release the drawer. Taking an uncertified check for an obligation suspends that obligation to the same extent it would be discharged if money equal to the amount of the instrument were taken, and the suspension continues until dishonor of the check or until it is paid or certified, with payment or certification resulting in discharge (UCC 3-310(b) and (b)(1)). States enact their own version of the code, so the operative text is your client’s state law.
An aged check is therefore not found money, and writing the amount back to income treats a suspended obligation as an extinguished one. North Carolina’s holder guidance does not read the write-off as a change of status either, since it treats an outstanding check as any check that has not cleared your bank for payment and counts written-off, stale-dated and returned-by-the-post-office items among them (North Carolina Department of State Treasurer, Guide to Unclaimed Property: Uncashed or Unpresented Checks).
On the reconciliation the item sits on the bank side, subtracted from the balance the bank reports, and the arithmetic that puts it there is in bank reconciliation.
Uncleared, Stale, and Aged Outstanding Checks
A merely uncleared check is a timing difference, and it clears itself the moment the payor bank pays it. Age is what ends that patience, because a bank is under no obligation to a customer having a checking account to pay a check, other than a certified check, which is presented more than six months after its date, though it may charge its customer’s account for a payment made thereafter in good faith (UCC 4-404). Past that mark whether the item is ever paid rests on the bank’s discretion rather than on the payee alone.
So an aged outstanding-check list gets sorted by date of issue rather than by amount, because age is what turns an item into a duty. An old item needs a decision rather than another month on the schedule, and where that decision falls in reconciliation work is covered in account reconciliation services. Voiding and reissuing is two acts rather than one, since the replacement is only safe once the original cannot also be paid. That is the job of a stop payment order, and NSF check sets out the terms that order carries. Voiding restores the liability to the payee. It does not create income.
When the Item Becomes Reportable to a State
Dormancy is set by statute, one state at a time, and it turns on the kind of check as much as on the state. In North Carolina, general checks such as accounts payable and vendor payments are presumed abandoned after five years if they remain unclaimed, wages and payroll after one year from the date payable to the employee, and checks issued by governmental units are reportable one year from the date issued (North Carolina Department of State Treasurer, Guide to Unclaimed Property: Uncashed or Unpresented Checks).
Another state answers in its own words. In Virginia, tangible and intangible property, including any income or increment on it and less any lawful charges, that is held, issued, or owing in the ordinary course of the holder’s business and has remained unclaimed by the owner for more than five years after it became payable is presumed abandoned, except as that chapter otherwise provides (Virginia Code 55.1-2501). A holder is the business that owes the money and is still sitting on it. There is no single national period to reach for.
Finding the payee is part of the duty rather than a courtesy. A Virginia holder has to exercise due diligence at least 60 days before the annual report is submitted where its records carry an address for the apparent owner that those records do not disclose to be inaccurate and the property is worth $100 or more (Virginia Code 55.1-2524).
Virginia sets the floor for that search, since due diligence includes the mailing of a letter by first-class mail to the last known address of the owner as indicated on the records of the holder (Virginia Code 55.1-2500).
Remitting closes the drawer’s exposure rather than parking it. Upon the payment or delivery of abandoned property to the administrator the Commonwealth assumes custody and is responsible for the safekeeping of that property, and the person who paid or delivered it is relieved of all liability, to the extent of the value so paid or delivered, for any claim that then exists or that afterwards arises in respect of the property (Virginia Code 55.1-2526).
What It Is Commonly Confused With
A deposit in transit runs the other way, money the client has recorded and sent that the bank has not yet credited, so it is added to the bank balance where an outstanding check is subtracted. A canceled check has already been paid and charged to the account as properly payable, so it is finished rather than waiting. An NSF check was presented and refused for want of funds, and that dishonor ends the suspension the unpaid check was holding over the underlying obligation (UCC 3-310(b)(1)). A post-dated check is a kind of outstanding check rather than a different item, since it is written and recorded but carries a later date on its face, so what is holding it up is the date rather than the payee.
Common Questions
The list is whatever the check register holds that the bank statement does not, and the marking method that produces it is in bank reconciliation. The second pass is the one that matters, because the report can hide its own oldest items. A check number may be reused before the stale-dated check it belonged to is cleared off to a liability account, and a report sorted by month and day but not by year moves older checks from the top into the middle, so a reviewer does not expect to find them there (North Carolina Department of State Treasurer, Guide to Unclaimed Property: Uncashed or Unpresented Checks).
If aged outstanding items are stacking up on client reconciliations faster than your reviewers can clear them, a trial task puts a block of your own work through Accountably’s review chain so your reviewer grades the output first.
