The term outstanding checks refers to those checks that have been recorded by a company as being written, but not yet cleared and posted to the account's statement by the company's bank. Outstanding checks are typically identified as part of the bank account reconciliation process.
At the end of each accounting period, companies go through a bank statement reconciliation process to understand any differences between the company's record of cash deposits and withdrawals, and the account statement issued by the bank. Oftentimes, a check may have been written by a company, recorded in the general ledger, but not yet shown on the company's bank account statement.
For example, a check may have been written and recorded by a company on December 31. However, due to the time necessary for the payee to receive and process the check, make a deposit, and the money to clear the banking system, this transaction will appear on the company's January bank statement. The reconciliation process will identify these differences as due to outstanding checks.
This process is part of the accounting cycle, allowing the company to accurately report cash, a current asset, on its balance sheet.
Company A recorded $200,000 in checks drawn from its general account in the month of December. During the November bank statement reconciliation process, Company A determined it has a balance of $12,000 in outstanding checks. The bank statement received by Company A showed checks paid of $196,000 in December. Company A's outstanding checks at the end of December would be calculated as:
Outstanding Checks (Starting Balance) | $12,000 |
Add: Checks Written | $200,000 |
Total Checks to be Paid | $212,000 |
Less: Checks Paid (Per Bank Statement) | $196,000 |
Outstanding Checks (Ending Balance) | $16,000 |
If you want to learn more about how to handle ripped or damaged checks, you can check out our online resource that can provide helpful information and guidance.
accounting cycle,current asset,cash,reconciliation of bank balances,charges and fees,cash over and short,deposits in transit,bank credits
Explore Investing Further
Trading has never been easier, thanks to the rise of online platforms that enable you to buy and sell various assets at the click of a button. But with so many options available, it can be challenging to decide which platform is right for you.
Looking for a way to avoid swap fees while trading forex?
Below listed are the small reviews of the top 10 ETF brokers available across the United States.
Our top beginner's pick for copy trading is eToro. Read on for more details, plus seven good alternatives.
Swing trading stocks can be a great way for investors to take advantage of short-term stock market movements and gain significant returns. If you're interested in swing trading, the key to success lies in selecting the right stocks to buy and sell quickly for a profit.
The table below lists the best stock picks under $2, listed on public exchanges.
The table below lists the best stock picks under $1, listed both on public and OTC exchanges.
This section will highlight the best EV-trading penny stocks available in the United States.
The demand for sustainable energy has grown rapidly in recent years. This has resulted in increased scrutiny of the automotive market. As a result, the electric vehicle (EV) industry has made significant advancements.
Intelligent Bio Solutions Inc. is a life sciences company, founded in 2016 with headquarters in New York and is engaged in performing diagnostic tests, real-time monitoring, and non-invasive surgery for its patients. The firm has developed a CoV-2 Biosensor, which can be used in RNA virus detection.
Hour Loop was founded in 2013 with headquarters in Redmond, Washington. It’s an online retailer involved in e-commerce in the United States that hit the public markets on Jan 7th of 2022. The company sells home/garden decor, electronic products, kitchenware, and apparel through walmart.com, amazon.com, and hourloop.com.