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Confusion About Cashing Employees' Checks
If you own a business and you cash your employees checks at your place of business, then deposit these already cashed checks into your company account, should these checks show on your monthly statements as withdrawals or deposits? If they show up as a cashed/withdrawn, doesn't this make them cashed twice? If you do cash them, should you not deposit them, since you cashed them already?
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 Both. The checks will be part of a deposit, and each check will appear as debits (withdrawals) from your account. If you did not cash checks for your employees, payday would look like this on your business' checking account: a series of check debits would reduce your account's balance as the checks are deposited or cashed by employees and the checks are posted to your account. If the total of the checks you issue is $50,000, your balance will go down by $50,000.
Suppose you decide you'll cash those checks at the plant for your employees. That will mean you need to get $50,000 cash. You go to the bank and cash a check for $50,000. Your bank balance is reduced before the pay checks are issued. Then you cash those payroll checks, and what do you have left? A bunch of pieces of paper. You can hold on to them and not deposit them, if you wish, but if you deposit them, they will both add to your balance (the deposit) and deduct from your balance (the checks). The end result is the same as if you didn't cash the checks, and there is a bank-retained record to prove that you paid everyone. You don't need to keep the checks yourself. In either scenario, the employee only gets cash (or value) for his paycheck once.
Published on BankingQuestions.com 10/02/08
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