How will a post-dated cheque issued to a creditor be treated in the Balance Sheet?

Answer 1

Accounting Procedures

• Generally accepted accounting principles (GAAP) and cash accounting methods treat post-dated checks the same way---no journal entry recording. A post-dated check is essentially a promise to pay, and until the business partner pays or reimburses amounts owed, no change is made in accounting books. To illustrate, an accounting clerk receives a $45,000 post-dated check negotiable in one week. She cannot debit cash (asset) and credit sales revenue or accounts receivable to record this transaction because no payment is made. She can, however, write a memo about the post-dated check in the accounting ledger. (Bookkeepers debit asset accounts to increase their balances and credit revenues to increase their amounts). If the check clears the customer's bank after one week, the clerk may then record journal entries in the sales ledger.

Financial Statement Rules

• Post-dated checks do not affect financial statement accounts, but regulatory guidelines and industry practices require a company to reveal significant amounts that it expects from customers at future dates. These amounts may relate to post-dated checks or promissory notes. GAAP requires a corporation to prepare accurate and complete financial statements that indicate such arrangements. Complete financial records include balance sheet, statement of profit and loss (P&L), statement of cash flows and statement of retained earnings.