Forgiven debt means you never incurred that expense. You make deposit to offset the checks, either as the same expense you thought you paid for; or as income. Example:

It is in this fiscal year, you thought you paid for Supplies, they don't want the check replaced, so you make a deposit entry and this split line is "from" Supplies expense.

The next line, this is the offset for something you posted in the Prior fiscal year as expense, so that is Income in this current fiscal year.

= total offset for all uncashed checks.