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Out of date cheques

A client recently contacted me to tell me that their bank had cashed a cheque that was over 2 years old. On questioning this they were told that the bank no longer applies the 6 month cut off on cheques.

We checked the legislation that states that cheques are actually valid for 6 years, although banking practice has been to refuse them after 6 months.

We have always written off old cheques for clients when doing their accounts, but it would now seem that we should be keeping them in the accounts for 6 years.

This could have implications for our audits particularly, as theoretically could we be overstating bank balances and should look back over 6 years to identify any written off amounts?

Also, at what point should we reallocate these amounts to creditors rather then outstanding cheques?

Any help or advice would be appreciated.
Philippa Keane


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08th Sep 2006 14:01

6 years
Just because a cheque has not been cashed, does not mean that the original debt that it was supposed to satisfy is no longer due, so I suppose the Statute Of Limitations still applies. In reality though I doubt that many of us would have written off material amounts without further investigation, so I don't think there is any point in going back the full 6 years.

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08th Sep 2006 09:11

I am wondering...... there such a thing as "unclaimed monies act" whereby unclaimed monies over a certain period will have to be deposited into this account. And if there is anything to prevent its deactivation, such that the rightful claimant can come forward to claim it later on? Still, I think the cheque issuer should be notified in this case, am I right? so as to be fair to both sides.

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08th Sep 2006 17:06

Stop the cheque at the Bank
If you are writing off a cheque, in your books, the best practice is to place a stop on it at the bank. That is the only sure way of preventing it being paid. The underlying debt is still valid as mentioned above for the 6 years as for any potential civil action.

Can I also comment on cheques and clear up a common mistake. A cheque is valid from the day it is issued. Post dating is not valid legally. A cheque is "A bill of exchange, drawn at sight on a banker". Returning post dated cheques is merely custom.

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08th Sep 2006 22:37

Returning cheques
I recently heard a rumour that cheques can be returned even after they have been paid. This may occur where a person has the cheque book stolen, but does not discover the theft for a while. Any cheques, fraudulently signed, which have been paid by the bank might be returned even after a few weeks have passed.

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