@qbteachmt 

Your solution seems sound and right to me, but does it work if the funds from the first check (the one that never made it to the recipient) has not yet been refunded by the bank before the replacement check was issued?

In that case, in addition to depositing to a liability account to track a payment still owed (bc vendor never received the check), dont we also need to track the payment that will increase our bank account once the bank refunds the money? (bc we haven't received it yet)