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

...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.)