How to Find Outstanding Checks on a Bank Statement 2022

At the end of each financial 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.

In 2023, the average U.S. business had 5.3 outstanding checks per month-end bank statement, with a total value of $12,400, according to a PNC Bank survey of small business accounts. The Federal Reserve’s 2022 Payments Study found that 18% of all checks written annually remain uncleared after 30 days, contributing to reconciliation delays. A 2024 QuickBooks analysis revealed that 62% of small businesses identified outstanding checks as a primary cause of bank statement discrepancies, impacting financial accuracy.

If the cash balance in your checking account appears to be excessive, it could be due to outstanding checks. Outstanding checks can result in inaccurate accounting, overdraft issues, and other financial blunders.

What is an Outstanding Check?

Outstanding checks refer to checks that have been cashed or deposited. Those checks that have been written by the payer but have not yet been cashed or deposited by the payee.

Until this occurs, the payer’s account balance from the cash flow will remain unchanged. Outstanding checks can cause a slew of issues in the bookkeeping, business accounting, and banking industries.

The time it takes for the postal service to deliver the check and the payee to deposit it results in a multi-day delay between when a check is created and when it is presented for payment. If the issuing entity delays mailing the check for any reason, the check may be delayed as well.

If a check has not yet cleared the bank by the end of the month, it does not appear on the month-end bank statement, nor does it appear as a reconciling item in the issuing entity’s month-end bank reconciliation.

An outstanding check is the payer’s liability until the payee presents the check for payment, at which point the liability is eliminated. If the payee never presents the check for payment, the payer can mark it as void in its accounting system.

How to find Outstanding Checks on a Bank Statement

Do you know how to find outstanding checks on a bank statement? Here’s how to look for outstanding checks on your bank statement.

Obtain a complimentary copy of your bank statement.
Make a list of all the cheque payments you must have made.
Call the people to whom you issued the check.
Total the money you spent on each.
Examine previous statements for any outstanding checks.

How to find Outstanding Checks on Bank Reconciliation

To identify uncleared checks and deposits in transit, compare the company’s list of issued checks and deposits to the checks shown on the bank statement.
Add any deposits in transit to the cash balance shown on the bank statement.
Deduct any unpaid checks.
This returns the adjusted bank cash balance.
Then, using the company’s ending cash balance, add any interest earned and the number of notes receivable.
Deduct any bank service fees, penalties, and non-sufficient funds checks. This results in an adjusted company cash balance.
The adjusted bank balance should match the company’s ending adjusted cash balance after reconciliation.

GAAP rules for outstanding checks

When a check has been outstanding for more than six (6) months, the payee must be notified in writing that the check was issued and is still outstanding. The notification must include the check number, check date, and outstanding check amount. The payee has 30 days to claim the unpaid check.
A listing of all checks that have been outstanding for more than six (6) months after notification was sent to the payee and the check was not claimed shall be prepared at least once per year. The funds will be deposited into the unclaimed liability account via a journal entry.
A listing of all outstanding checks that have been deposited into the unclaimed liability account is made once a year, in September, to determine which outstanding checks (checks dated three (3) years or older) will be sent to the State of Illinois, Unclaimed Property Division, per State Statute.

Why are outstanding checks subtracted from the bank?

Outstanding Checks should be deducted from the bank side of the reconciliation because they were deducted from the book balance at the time the checks were written.

These are checks that the company has written but have not yet been cleared by the bank. When you write a check, it takes a few days for it to clear. At the end of the month, most businesses have a number of outstanding checks.

Outstanding Checks Journal Entry

When an organization prepares a bank reconciliation, it subtracts the outstanding checks from the bank statement balance to determine the correct or adjusted bank balance.

The company does not need to write a journal entry because the checks were recorded in the general ledger account when they were written.

If, on the other hand, a company voids one of its outstanding checks, it must make an entry in its general ledger. Cash will be debited in order to increase the account balance.

The credit portion of the transaction will almost certainly go to the original debited account when the check is issued. The canceled check is also removed from the list of unpaid checks. In order to do this effectively, you must first understand how to prepare a cash flow statement.

Outstanding checks vs unreleased checks

Outstanding checks vs unreleased checks – Outstanding checks are that have been issued by the company but not yet presented for payment by the payee.

This commonly occurs when checks are written in the last few days of the month. Unreleased checks have not yet been issued to the payee but have been deducted from the cash account. Payments will not yet be reflected as withdrawn from the bank in either case.

How to write off outstanding checks

When you wrote a check to a vendor and they didn’t deposit it within 180 days, you could simply write off the check and debit the money back to your checking account.

It was a fairly simple procedure. You had a list of outstanding checks that hadn’t been cashed yet, and as the 180-day mark approached for each check, you’d simply void it.

Here is the process by which you can write off outstanding checks

Make a list of outstanding checks or obtain one from the bank.
Checks that are no longer redeemable should be voided.
Return the amount of the canceled check to your checkbook balance.
Make an adjusting journal entry, debiting your bank account for the amount of the voided check and crediting the expense account that was initially debited.
Delete the check from the list and move on.

How to determine outstanding checks

According to moneyzine.com, business Z had $200,000 in checks drawn from its general account in December. Business Z discovered a balance of $12,000 in outstanding checks during the November bank statement reconciliation process.

Business Z received a bank statement that showed $196,000 in checks paid in December. The outstanding checks for Company Z at the end of December would be calculated as follows:

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

Credit: Money-zine

With the above illustration, do you think we can now calculate our outstanding checks? Consider the example of outstanding checks.

How to Prevent Outstanding Checks

Outstanding checks are a common cause of bank overdrafts. Maintaining a balanced checkbook is one way to avoid this occurrence. If the payee decides to cash the check later, this can help avoid any unnecessary NSFs.

You can also call or write the payee to remind them that the check is still outstanding. This could persuade them to deposit or cash the check. If they haven’t received the payment, they may contact you to reissue the check.

With banking becoming progressively electronic, using the checking account’s online bill pay service is another way to avoid writing a check and forgetting about it. This will have to provide real-time data on the total dollar amount of checks outstanding as well as the total dollar balance in the account.

Reconciliation of bank statements with outstanding deposits

On January 31, you received a $500 check from a customer. You record $500 in earnings in your books. You put the money in your bank account on February 3rd. When you reconcile your January books, you will notice that $500 is missing from your January bank statement.

Subtract the outstanding deposit from your small business ledger to adjust your records.

Conclusion

As a business, you are responsible for ensuring that your books are properly closed. Knowing your outstanding deposits enables you to keep accurate financial records. You can avoid accounting problems by reconciling your bank account.

When doing your bookkeeping, there is always the possibility of making a mistake. To avoid forgetting important monthly tasks, create a small business accounting checklist. Bank statement reconciliation ensures that your bank statement and books are in sync. If you don’t reconcile your accounts, you’ll waste more time and money correcting errors.

You can also use bank statement reconciliation to track the progress of your business. You can measure profitability and forecast cash flow by using outstanding deposits to balance the accounts.

FAQs

Are outstanding checks considered cash?

Checks that have been outstanding for an extended period of time cannot be cashed because they have become void. If a check is dated after 60 or 90 days, it becomes stale.

What is an outstanding check quizlet?

A check that has been written but not yet presented to a bank for payment. Outstanding payment. a deposit made and recorded in the checkbook but not yet reflected on the bank statement

Where are outstanding checks recorded?