Is a postdated check considered to be currency?
A postdated check—a check with a date that is later than the current date—is not considered to be currency. Further, the postdated check should not be reported as part of the Cash account balance until the date of the check.
If the postdated check was received as payment on accounts receivable, the accounts receivable balance is not reduced until the date of the check.
To illustrate this, let’s assume that on August 20 a company receives a $1,000 postdated check. The check is dated September 5 and represents the full payment on one of the company’s accounts receivable. Since the postdated check is not considered to be money until the date of the check, the accounts receivable should not be reduced and cash should not be increased until September 5. Therefore, the company’s August 31 balance sheet will report that the customer’s $1,000 accounts receivable is still due.
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5 Responses to “Is a postdated check considered to be currency?”
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This deifintion is concise and clear conceptual
I certainly agree that Cash should not be debited until the payment can be negotiatied, but shouldn’t the payment be recorded somewhere to have one’s books be most accurate? If this were to happen bridging a staffing change, I think that both incoming and outgoing staff would like to know that a postdated payment has been accounted for rather than just lying in a drawer.
I love this site, and am so pleased that the wealth of information it offers is so generously given. Thank you for the opportunity to respond.
I have to disagree with this answer based on the fact that a bank will honor a check regardless of the date you write on it. I know this for a fact because in my company managers more than once have given out paychecks in advance of payday and were cashed a before the date on the check.
A banker once explained to me that the check date is for your convenience, so you can know the date that you issued it when it is returned to you after it is cashed. The check is considered negotiable as soon as it is signed. But hey, don’t take my word for it, write yourself a postdated check and take it to the bank and cash it.
John — whether the instrument is valid or not prior to that date is not relevant, as the intent of the person giving it is that it wouldn’t be.
As such, a post-dated check has some ambiguous validity prior to that date — it might be good, or the funds may not be in the check writer’s account until that date.
If you hold a lot of post-dated checks, it *may* be prudent to record them in their own account, but then you run into some problems.
First, often a post-dated check is provided as payment for some future service — e.g. monthly rent. That rent hasn’t been billed yet (you don’t record it as receivable until the first of that billing period) — so what account do you credit with this “payment”?
Second, depending on your jurisdiction, you may have challenges with a post-dated check. In theory, a check is simply a contract to pay — and a contract dated some time in the future contains errors and may not be enforceable.
Just as a check typically becomes “stale-dated” after 6 months and isn’t worth anything, a post-dated check is equally invalid.
To answer Aaron: a post-dated check should be kept with a note wherever the deposit book is kept. That will facilitate your staffing changes.
John - all the banks in Singapore where we reside do not accepted post-dated cheques. Once they receive the cheques (if via post or deposit box) earlier than dated, they will simply send it back, and deduct an administrative charge.
If they receive by hand from a manager, they will simply ask the manager to bring the cheque on the exact or later date.