An outstanding check, or un-cleared check, is written and recorded in the depositors accounting system but hasnít been paid by the bank before the statement date. In other words, an outstanding check is one that was written but not cashed before the end of a statement period. Itís still out there waiting to be cashed and drawn out of your checking account. These generally do not appear on the monthly bank statement because they havenít been paid from the account as of the statement date.
Think about it this way. When you write a check to vendor, the bank has no idea the check has been written. Therefore, they donít report it. Once the check has been deposited or cashed by your vendor, your bank will debit your account and mark it as a cleared check on your next statement. You are entirely dependent on when the vendor decides to cash the check.
This is why your (or company) bank accounts need to be reconciled with the bank statement. There is a discrepancy between what your checkbook or accounting system says you have in your account and what the bank reports on your monthly statement. One of the main differences are the outstanding checks that have been recorded in the accounting system but havenít been recorded by the bank.
Itís important to keep track of the amount of checks outstanding because they could be cashed at anytime. You may have had even cash in the account when you wrote the check, but a month later your account might be lower. This could cause and overdraft or NFS check to bounce. Itís important to keep enough money in your account to cover all the outstanding checks at all times.
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