Reversing the cheque will only affect your March books.   If they are final, closed, and cannot be adjusted, then you will have to make an entry into the current year in order to record the reverse of the original transaction.

The reason it will not affect your March reconciliation, is that the reversal will create another outstanding item that will show on reprinting the March reconciliation.  You can record the original cheque and the reversal as 'cleared' on the next period to get them off the list.

You would go back into your A/P module - select the Payment module, select the vendor the chq was written to, select the icon that says 'Include fully paid invoices/prepayments' (yellow sheet with red lines), find the invoice the chq paid and select that invoice by entering amount as a negative amount. Select today's date for chq date and enter chq nbr as Cancel(the original Chq Nbr) and post.

Then you would go back into the A/P module, select Purchase Invoice, enter the vendor name, enter as invoice No Cancel (original invoice nbr), use today's date, enter the amount as negative amount and use same account nbr that was used last year. Then post.

You can now go back into the Payment module and clear the Cancel Invoice and the Cancel Chq amount which will result in a 0.00 chq amount and post. This ensure that the cancelled invoice and the reversed chq does not appear when pulling up the detailed vender aged listing.

You have declared the expense last year which affected the Retained Earnings so this year you will be crediting that same expense account and that will reverse the effect on Retained Earnings for this year.

Smith and Co wonderful advice, thank you!