Enter uncleared cheques when converting to Xero

Learn how to bring across uncleared cheques from your previous accounting system into Xero and reconcile them once you start using Xero on a day to day basis.

Bank accounts with uncleared cheques

Xero has 2 balances for bank accounts:

  • Bank balance in Xero - the sum of all bank account transactions entered in a bank account dated today or in the past.
  • Statement balance - the balance of all bank statements imported into this bank account in Xero.

If your bank balance as recorded in your previous accounting system differs from your actual bank account balance at the time of conversion to Xero, it's likely to mean you have cheques that have been written but not yet cleared on your bank account. These uncleared cheques need to be shown as a liability on your balance sheet.

Knowing how to use these different balances when you convert to Xero means your starting bank balance in Xero will be correct. Xero will allocate the conversion balance entered to both the Xero bank account balance, and your bank statement balance. If these balances are not the same at the time of conversion due to uncleared cheques, follow the steps below.

Account for uncleared cheques when you first set up your organisation in Xero and are entering your conversion balances

  1. Create a new current liability account called Uncleared Cheques.
  2. Make sure the bank account balance entered as the conversion balance matches your bank statement.
  3. Enter the amount of the uncleared cheques into the new liability account.
  4. Added together, the balance of the bank account and uncleared cheques should match the value of your bank account in your previous accounting system.
  5. Make a list of all uncleared cheques including the payee and amount.

Reconcile the uncleared cheques once you start using Xero on a day-to-day basis

  1. Identify and mark-off each cheque on the above list as it is deducted from, or deposited into your bank account.
  2. As each cheque is presented in your bank account and brought into Xero a bank statement transaction, create a Spend money transaction that is coded back to the Uncleared Cheques liability account you created. Do not code this cheque to the original expense (or revenue) account as that was done in the previous year.
  3. When all uncleared cheques (and all other bank statement lines) have been accounted for, your Xero bank account balance (shown on the Dashboard and Bank Account sections as 'Balance in Xero') should be correct. If you are still unable to reconcile your bank account these reconciliation tips might help.