Check Stub
Definition
A check stub is a portion of a check that may be perforated and detached from the check itself, retained for convenience and record-keeping purposes. The check stub contains pertinent information regarding the check such as the date, check number, payment amount, payee name, and the account from which the funds are drawn. Both the check and the stub are typically printed with the same check number for easy referencing.
Examples
- Employee Paychecks: When a company issues a paycheck to an employee, the portion kept by the employee detailing gross pay, deductions, and net pay constitutes the check stub.
- Personal Banking: When individuals issue checks from their personal checkbooks, the check stub section is commonly retained in the checkbook to help track issued payments.
- Business Checks: Businesses issue checks to suppliers or service providers and retain the stubs which detail the payment purpose and the amount for proper financial tracking and accounting.
Frequently Asked Questions (FAQ)
Q: What information is typically found on a check stub?
A: Check stubs generally include the date, check number, payee’s name, payment amount, and a memo or description of the transaction, allowing for detailed record-keeping.
Q: Why should you keep check stubs?
A: Check stubs should be kept for accurate record-keeping, to simplify the reconciliation of bank statements, facilitate tax preparation, and provide evidence of payment in case of disputes.
Q: How long should you keep check stubs?
A: It’s generally advised to keep check stubs for at least three years, though for tax purposes, the IRS recommends retaining financial records for up to seven years.
Q: Are digital check stubs acceptable?
A: Yes, electronic or digital check stubs are acceptable and often used in modern accounting systems. They provide the same information in a digital format and are easy to store and retrieve.
Q: Can I get a check stub for direct deposits?
A: Yes, employees typically receive an electronic version of a check stub with information about their pay and deductions even if the actual payment is made through direct deposit.
- Account Payable: Money that a company owes to its suppliers and service providers, which will often be paid with a physical check or electronic payment retained with a stub for records.
- Bank Reconciliation: The process of comparing accounting records to bank statements, for which check stubs can provide important reference information.
- Payroll: Total amount of money that a company pays its employees, which includes providing paychecks along with stubs containing earnings and deductions.
- Direct Deposit: A digital payment method where money is transferred directly into a receiver’s account, often accompagné by an electronic stub detailing the transaction.
Online References
Suggested Books for Further Studies
- “Accounting Made Simple: Accounting Explained in 100 Pages or Less” by Mike Piper
- “Financial Accounting For Dummies” by Maire Loughran
- “Payroll and HR: Governmental Oversight and the Payroll Function” by Steven M. Bragg
- “Accounting: The Ultimate Guide to Accounting Principles, Financial Accounting and Management Accounting” by Gregory Becker
Fundamentals of Check Stub: Accounting Basics Quiz
### What primary purpose does a check stub serve?
- [x] Record-keeping and documentation of payments
- [ ] Advertising and marketing
- [ ] Customer service and support
- [ ] Investment tracking and analysis
> **Explanation:** The primary purpose of a check stub is for record-keeping and documentation of payments. It provides details about the payment such as the date, amount, and payee, which is essential for auditing and reconciliation.
### Does a check stub legally need to include the payee's name?
- [x] Yes, it’s standard to include the payee’s name on a check stub.
- [ ] No, the payee’s name is optional.
- [ ] Only large amounts require the payee's name.
- [ ] The payee's bank requires this information.
> **Explanation:** It is standard and often necessary to include the payee's name on a check stub to ensure proper documentation and reference in financial records.
### How long should typical check stubs be retained for tax purposes?
- [ ] One year
- [ ] Two years
- [x] Seven years
- [ ] Ten years
> **Explanation:** For tax purposes, it is recommended to retain check stubs and related financial documents for up to seven years, as the IRS may review up to seven years of past tax history.
### Is a digital check stub acceptable compared to a paper check stub?
- [x] Yes
- [ ] No
- [ ] Only if it’s printed
- [ ] Only in certain industries
> **Explanation:** Digital check stubs are acceptable and commonly used today, providing the same information in a digital format and often being easier to store and retrieve compared to paper versions.
### What kind of transaction details can be found on a check stub?
- [x] Date, check number, payee's name, payment amount, and memo
- [ ] Only the payment amount and payee's signature
- [ ] Marketing preferences and survey results
- [ ] Personal notes and unrelated expenses
> **Explanation:** Check stubs generally include transaction details such as the date, check number, payee's name, payment amount, and a memo or note elaborating on the transaction.
### What should you do if you lose a check stub?
- [ ] Ignore it as it is not crucial.
- [ ] Ask the bank for a replacement check stub.
- [x] Record the transaction details manually and safeguard other related documents.
- [ ] Request a new payment with a new stub attached.
> **Explanation:** If a check stub is lost, it’s important to manually record the transaction details as precisely as possible and ensure the safeguarding of related documents for future reference.
### Can employers provide e-check stubs for direct deposits?
- [x] Yes
- [ ] No
- [ ] Only for employees’ requests
- [ ] Only for salaries above a certain level
> **Explanation:** Employers can provide electronic check stubs (e-check stubs) which show details of the direct deposit transaction, including gross pay, deductions, and net pay.
### Typically, what number is shown on both the check and the check stub for reference?
- [ ] Social security number
- [ ] Bank identification number
- [ ] Telephone number
- [x] Check number
> **Explanation:** Both the check and the check stub are printed with the same check number, ensuring coherent referencing for financial records.
### On which side of the check is the check stub usually found?
- [x] The left-hand side
- [ ] The right-hand side
- [ ] The bottom
- [ ] The top
> **Explanation:** The check stub is usually found on the left-hand side of the check and is often perforated for easy detachment.
### Are check stubs used only in business transactions?
- [ ] Yes
- [ ] No
- [x] No, they are used in both personal and business transactions
- [ ] Only by non-profits
> **Explanation:** Check stubs are utilized in both personal and business transactions to track and document payments for financial accuracy and record-keeping.
Thank you for delving into the intricate details of check stubs and participating in our informative quiz. Keep advancing your accounting knowledge and financial record-keeping skills!
