Checks outstanding

Checks outstanding are checks that the company has written that have yet to be recorded by the bank!

We can pinpoint here...

Question: On April 31st, 2022, Hats LLC has a Cash balance of $800. Over the course of the month, they wrote $10,000 in checks, but $200 of those checks haven’t been processed by CashForDays bank. In addition, $170 out of their $20,000 in cash receipts still needs to be deposited in CashForDays Bank.

However, on their bank statement, it shows a Cash Balance of $850 and includes the following items not yet recorded by the company: a note receivable collected by the bank for $200, interest earned on that note of $20, and a bank service fee of $50. In addition, the bank accidentally charged Hats LLC $50 for a service fee that was meant to be on another customer’s account. Lastly, one of Hats LLC customer’s checks for $100 returned back with non-sufficient funds.

Prepare the bank reconciliation to correct the ending Cash Balance on April 31st, 2022.

...that "they wrote $10,000 in checks, but $200 of those checks haven’t been processed by CashForDays bank". Those $200 in checks are the definition of checks outstanding!

Remember, checks outstanding subtract from the Bank's Cash Balance...

Bank's Cash Balance Items

Reconciling ItemDescriptionAdd or Subtract to Cash Balance?
Deposits outstandingDeposits made by the company, not recorded by the bank yet.Add
Checks outstandingChecks written by the company, not recorded by the bank yet.Subtract
Bank errorBank accidentally charges (or forgets to charge) the company.Add / Subtract (it depends)

...so we'll place those $200 of checks outstanding on the Bank's Cash Balance side of our bank reconciliation like so:

(It's in parentheses because it is a negative number subtracting away from the Bank's Cash Balance.)

Bank's Cash Balance

Per Bank Statement$850
Deposits outstanding$170
Checks outstanding($200)
Bank Balance per Reconciliation???

Company's Cash Balance

Per General Ledger$800
Company Balance per Reconciliation???