ACCOUNTING FOR DISHONORED CHECKS (POV OF THE CREDITOR )

 A check is dishonored either by nonpayment or non-acceptance

 Dishonor by non-payment occurs when (a) the check is duly presented for payment and payment
is refused or cannot be obtained; or (b) presentment is excused and the check is overdue and
unpaid (sec 83, RA No. 2031, Negotiable Instruments Law)
 Therefore, dishonored check is a check that is not accepted when presented for payment, e.g, a
check returned by the bank because of lack of sufficient funds, - ‘bounced’ check
 When a check drawn in favor of the government is not accepted by the drawee for any reason, the
drawer shall continue to be liable for the sum due and all penalties resulting from delayed
payments. Where the reason for non-acceptance by the drawee bank is insuffiency of funds, the
drawer shall be criminally liable therefor
 Dishonored checks are recorded in the “Other Receivables” account.

Alamin muna kung may authority to use the fund or wala.

Kapag walang authority to use the Fund:
Nasa taas ung entry. Tayo o ung Agency ung nakareceive ng dishonored check.
Origin: Puwedeng nagkaroon ng receivable tayo sa isang tao, and eto ung entry Received and Dishonored
this year)
Other Receivable 100,000
Income or other Appr Account 100,000
Magbabayad yan sa government agency, Once na nabayad yan, eto ang entry
Cash Collecting Officer 100,000
Other Receivable 100,000
It will be remitted to BTr kasi wala siyang authority to use the fund, pupunta siya sa drawee bank doon
ireremit. Ang entry ditto
 Cash Treasury Agency Deposit` 100,000
Cash Collecting Officer 100,000
Kung biglang tumalbog, doon papasok ugn dishonored Check. And so on ung entries na nasa taas.
If Received last year and dishonored this year, un ung pangalawang entry. Same explanation sa cancelled
check kaya accumulated surplus

The government agency will now demand replacement check dun sa nareceive niyang dishonored check.
Ung letter B, ay may authority to use the fund: Same origin lang. If the agency has the authority to retain
its collection any amount is deposted directly to its own commercial account and that is local currency
foreign currency or savings account.
 ACCOUNTING FOR DISALLOWANCES
 Disallowances shall be taken up in the books of accounts only when they become final and
executory. The Accountant shall prepare the JEV to take up the Receivable-
Disallowances/Charges and credit the appropriate account for the current year or accumulated
Surplus/(Deficit) account if pertaining to expenses of previous years
 Cash settlement of disallowances shall be acknowledged through the issue of an official receipt
and reported by the cashier in the RCD

The main difference between disallowances and overpayments, is that disallowances are recorded
expenses that shall not be recognized as an expenses, while overpayments are legitimate of properly
recognized expenses but whose payment are greater than on what is recorded or incurred