A voided check is a check that has been cancelled. Once it has been appropriately voided, a check cannot be used. There are several possible reasons for a voided check, including the following:
- There was a mistake in filling out the check
- The check was issued in error
- The check was submitted by an employee to an employer for use in setting up a direct deposit payroll account
In all of these cases, the voided check is not cashed.
A voided check may be perforated with a "Void" stamp, or crossed out, or have "Void" written across it, be shredded, or simply be stored in a voided checks file. It is best to permanently deface or destroy a voided check, so that no one can present it to a bank at a later date and expect to be paid for it. If the check is not currently in the company's possession, then contact the bank and authorize a stop payment on the check (for which the bank will charge a fee).
In the accounting system, the check would have been recorded when it was originally created, so a reversing entry must be made that debits (increases) cash and credits (decreases) the account to which the payment applies. Thus, if the payment had been for an expense, the credit would be to the related expense account; if the payment had been to acquire an asset, the credit would be to the related asset account.
If there is a check register, the reversing entry is needed in order to record the elimination of the accounting transaction associated with the check number that is printed on the check.
In a computerized accounting system, there is usually a menu option for voiding a check, since this is a sufficiently common activity to warrant having its own routine.