R Losey,
"I thought "floating a check" means that one issues a check, knowing that there
isn't money to cover it, but planning to deposit funds before the check is
presented for cashing." That is actually called check kiting and is actually,
I was going to say technically, but actually is proper, illegal in the US.
And you are correct, that from an accounting point of view the actual
transaction date is the correct date, not the cleared or posted date of the
recipient. Your third point is correct also.
Here is a definition of kiting:
* "Process:
* The kiter writes a check from one bank account (Bank A) to another
(Bank B), even though there are insufficient funds in Bank A.
* Before the check clears at Bank B, the kiter withdraws funds from Bank
B" or this could be another bank "and deposits them back into Bank A.
* This cycle may be repeated multiple times, relying on the float time
(the time it takes for a check to clear) to stay ahead of the fraudulent checks.
*
Example: Imagine writing a check for $1,000 from Bank A to Bank B, even though
you only have $100 in Bank A. Before the check clears at Bank B, you withdraw
$1,000 from Bank B and deposit it back into Bank A. The net result is a series
of fraudulent withdrawals based on uncleared checks."
The red comment on the second line of the second item is mine.
Thank You,
Gyle McCollam
Gyle McCollam
[email protected]<mailto:[email protected]> email
________________________________
From: gnucash-user <[email protected]> on
behalf of Kalpesh Patel <[email protected]>
Sent: Tuesday, April 9, 2024 1:06 PM
To: 'R Losey' <[email protected]>
Cc: [email protected] <[email protected]>
Subject: Re: [GNC] Recording transactions (date)
In the end, monies is what is “float”. That is what I remember from finance
course number of decades ago; it is more of money function rather than time
function.
Anyways, I also have pondered with that “delay” between when one has “started”
the transaction and when one has “completed” the transaction. The way I am
dealing with it is to denote the transaction on the day I actually made it and
then when reconciling it update the date as it appears on financial institution
side. If one really wants to account for it then there would be an intermediary
“floats” account to which you would post the transaction when “started” and
then when it “completes”, another transaction would be posted from that
“floats” account into the final account. This “floats” account would always be
running close to zero unless a check sent that has never been cashed which
would show up here. I would think that this “floats” would be a liability
account…
From: R Losey <[email protected]>
Sent: Tuesday, April 09, 2024 12:44 PM
To: Kalpesh Patel <[email protected]>
Cc: [email protected]
Subject: Re: [GNC] Recording transactions (date)
I thought "floating a check" means that one issues a check, knowing that there
isn't money to cover it, but planning to deposit funds before the check is
presented for cashing.
But perhaps you mean "float time" -- that may well be the correct term. I was
just interested in knowing what people here (many of whom have a closer
acquantaintence with accounting than I do) thought about using the actual date
of the transaction versus using the cleared date of the transaction.
Clearly, the "cleared" date is when the money actually transfers, but (to my
mind), one doesn't have an accurate picture of one's finances if there is
pending money to be removed from an account.
On Tue, Apr 9, 2024 at 7:26 AM Kalpesh Patel <[email protected]
<mailto:[email protected]> > wrote:
In the states, isn't that what is called "floats"?
-----Original Message-----
From: Liz <[email protected] <mailto:[email protected]> >
Sent: Monday, April 08, 2024 6:50 PM
To: [email protected] <mailto:[email protected]>
Subject: Re: [GNC] Recording transactions (date)
On Mon, 8 Apr 2024 17:11:37 -0500
R Losey <[email protected] <mailto:[email protected]> > wrote:
> Since I first learned about recording transactions, I have always
> dated a transaction on the date I wrote the check; similarly, when
> entering credit card transactions, I use the date that I actually
> used the credit card.
>
> Recently, however, I was having a discussion with a friend and he
> said that he uses the bank or credit card date of entry for all of
> his transactions.
>
> I thought this was strange - probably because it is different from the
> method I've used all of my life. Perhaps I am the odd one... or
> perhaps it's merely a matter of choice, so I thought I'd bring it up
> to this list to see what people think about it.
>
> From (a very brief) research about this topic, perhaps this is the
> difference between cash basis accounting and accrual accounting?
>
>
> After thinking about it for a bit, one issue with using the date that
> the transactions occur is the reports, especially if one has repeating
> transactions. For example, if the satellite service bill is paid each
> month on the 28th, using my method, I record a transaction on the
> 28th. My friend will see it on the 29th or 30th, but if the weekend
> or holiday hits just right, it can be the 1st or 2nd before he sees
> it. In the long run everything should be the same, but the monthly
> sub-totals can look odd. Checks can be even worse... someone may hang
> onto one for weeks.
>
> I'd appreciate thoughts on the topic.
I think it is a philosophical difference.
There are legal ramifications, especially when you are spending money.
If you future date transactions you may spend money you don't actually
have. In my jurisdiction a business doing this is in big trouble, for
"trading while insolvent".
It is not the difference between cash and accrual accounting, but is
part of the differences.
Liz
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_________________________________
Richard Losey
[email protected] <mailto:[email protected]>
Micah 6:8
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