Money Matters

What are outstanding cheques in bank reconciliation?

Outstanding cheques can make your bank balance look higher than the cash you actually have available. Learn how to identify and calculate them, reconcile your accounts accurately, and handle stale-dated cheques in Canada.

Published August 17, 202610 min read Share

Outstanding cheques can make the balance on your bank statement look higher than the amount recorded in your books. Learn what outstanding cheques mean, how to calculate them during bank reconciliation, and how Canadian businesses should manage cheques that remain uncashed.

Reconciling your bank accounts regularly helps you understand how much cash your business has available and identify transactions that need attention.

One common difference is an outstanding cheque: a cheque your business has issued and recorded, but which hasn’t yet cleared the bank.

This guide explains what outstanding cheques are, how they affect bank reconciliation, how to calculate them, and what to do when a cheque remains outstanding for an extended period.

Key takeaways

• An outstanding cheque is a cheque that has been issued and recorded but hasn’t yet cleared the business’s bank account.
• When reconciling from the bank statement balance, subtract outstanding cheques because the bank hasn’t yet deducted them.
• An outstanding cheque normally doesn’t require another journal entry during reconciliation because the payment was recorded when the cheque was issued.
• In Canada, regular cheques are generally considered stale-dated after six months, but they aren’t automatically invalid.
• Before reversing or reissuing an old cheque, confirm whether the payment is still owed and check whether unclaimed-property requirements apply.

Here’s what we’ll cover

What are outstanding cheques in bank reconciliation?

An outstanding cheque is a cheque that a business has issued to a payee but that hasn’t yet cleared the business’s bank account.

The business will usually record the payment in its accounting system when it issues the cheque. However, the bank won’t deduct the money from the account until the payee deposits or cashes it and the cheque clears.

This creates a temporary difference:

• The business’s books already reflect the payment.
• The bank statement still includes the money in the account.

Outstanding cheques are normal timing differences rather than accounting errors, provided they’re valid, recorded correctly, and still expected to clear.

For example, suppose your business issues a $1,200 cheque to a supplier on March 28 and records the payment immediately. If the supplier deposits it on April 3, the cheque may still be outstanding when you reconcile your bank account at the end of March.

How do outstanding cheques affect bank reconciliation?

When preparing a bank reconciliation, outstanding cheques are subtracted from the ending balance shown on the bank statement.

This is because the bank statement still includes money that the business has already committed and removed from its accounting records.

The basic calculation is:

Adjusted bank balance = Bank statement balance + Deposits in transit − Outstanding cheques ± Bank errors

The adjusted bank balance should then agree with the adjusted balance in your accounting records after you account for items such as bank fees, interest, direct debits, or book errors.

Outstanding cheques matter because failing to account for them can:

• Make it appear that more cash is available than your business actually has to spend.
• Increase the risk of overdrafts or non-sufficient funds (NSF) charges.
• Distort cash flow forecasts.
• Make errors or duplicate payments more difficult to identify.
• Leave old or potentially fraudulent cheques undetected.

How to identify and calculate outstanding cheques

To find outstanding cheques during bank reconciliation, compare the cheques recorded in your accounting system with the transactions that cleared on your bank statement.

1. Review your cheque register

   Start with a list of cheques that were issued on or before the bank statement date.

   For each cheque, confirm the:

   • Cheque number
   • Issue date
   • Payee
   • Amount
   • Bank account
   • Current status

   Include cheques outstanding from previous reconciliation periods, not only those issued during the current month.

2. Match cleared cheques to the bank statement

   Compare the cheque number and amount in your records with the cheques that cleared the bank.

   Mark each successfully matched cheque as cleared.

   If the amount processed by the bank differs from the amount recorded, investigate the difference rather than treating the full cheque as outstanding.

3. Investigate unmatched cheques

   A cheque recorded in your register but not shown as cleared on the bank statement may be outstanding.

   Before including it, check that the cheque:

   • Was issued before the statement date.
   • Hasn’t already been voided or replaced.
   • Wasn’t recorded twice.
   • Didn’t clear under a different cheque number or amount.
   • Hasn’t been affected by a bank or recording error.

4. Add the outstanding amounts together

   Use the following formula:

   Total outstanding cheques = Sum of all issued cheques that have not cleared as of the reconciliation date

   Subtract this total from the bank statement balance as part of the reconciliation.

Outstanding cheques bank reconciliation example

Suppose your bank statement shows an ending balance of $25,000.

Your records show:

• Outstanding cheque 1048: $1,250
• Outstanding cheque 1051: $2,000
• Deposit in transit: $1,100

First, calculate the outstanding cheques:

$1,250 + $2,000 = $3,250

Then adjust the bank statement balance:

$25,000 + $1,100 − $3,250 = $22,850

The adjusted bank balance is therefore $22,850. This should match the adjusted balance in your accounting records once items such as bank fees, interest, or recording errors have also been accounted for.

How to record outstanding cheques

Record a cheque in your accounting system when it is issued, according to your business’s accounting policies and software workflow.

A cheque record should generally include:

• Cheque number
• Issue date
• Payee
• Amount
• Payment purpose or associated invoice
• Bank account
• Approval or supporting documentation

The entry will typically credit the relevant cash or bank account and debit an expense, asset, or accounts payable account, depending on what the cheque is paying for.

If the cheque remains outstanding at the reconciliation date, you normally don’t record another journal entry. Instead, list it as an outstanding cheque and subtract it from the bank statement balance.

When the cheque eventually clears, match the bank transaction to the payment already recorded. Recording the payment again would duplicate the expense or reduce cash twice.

The treatment may differ if the original cheque is cancelled, reversed, or replaced. Follow your accounting policies and consult your accountant where necessary.

How long can a cheque remain outstanding in Canada?

In Canada, a regular cheque is generally considered stale-dated after six months. However, stale-dated doesn’t mean automatically void.

According to Payments Canada, a financial institution may still honour a stale-dated cheque, although it isn’t required to do so.

There are some important exceptions to the six-month rule:

• Government of Canada cheques don’t stale-date.
• Bank drafts and money orders don’t stale-date.
• Certified cheques aren’t subject to the standard six-month stale-dating treatment.
• Provincial government cheques are generally treated like regular cheques and may become stale-dated after six months.

Businesses should therefore avoid assuming that an old cheque can no longer clear.

What to do with stale-dated or long-outstanding cheques

Long-outstanding cheques should be investigated rather than automatically removed from your accounting records.

Contact the payee

Confirm whether the payee:

• Received the cheque.
• Still has it.
• Has already attempted to deposit it.
• Is still entitled to the payment.
• Requires a replacement or another payment method.

Keep a record of your attempts to contact the payee.

Consider a stop-payment request

If a cheque has been lost, stolen, or is being replaced, ask your financial institution whether a stop payment is appropriate.

Your financial institution may charge a fee, and a stop-payment request doesn’t guarantee that the cheque will be intercepted. Confirm the process and terms directly with your financial institution.

Cancel and reissue carefully

If payment is still owed, cancel the original cheque in your accounting system and reissue the payment using the correct procedure.

Don’t issue a replacement without addressing the original cheque. Otherwise, both cheques could potentially be presented, creating a duplicate-payment risk.

Check unclaimed-property requirements

An uncashed cheque may represent money that still belongs to an employee, supplier, customer, or another payee. Businesses shouldn’t automatically recognize the amount as income simply because the cheque is old.

Unclaimed-property rules vary across Canada and can depend on the province, type of payment, amount, and payee’s location. Several provinces, including Alberta, British Columbia, Manitoba, Quebec, and New Brunswick, have unclaimed-property regimes that may apply to uncashed cheques.

Before writing off a long-outstanding amount, check the rules that apply to your business or seek professional advice. Provincial resources include the Alberta Unclaimed Property Program, British Columbia Unclaimed Property Program, Revenu Québec, and the Financial and Consumer Services Commission of New Brunswick.

Best practices for managing outstanding cheques

If a cheque stays on your reconciliation month after month, find out why. Use the following practices to spot ageing cheques early, follow up with payees, and keep a clear record of anything you cancel or reissue.

Reconcile bank accounts regularly

Complete bank reconciliations at least monthly and consider reconciling more frequently if your business processes a high volume of payments.

Regular reconciliation helps you identify outstanding cheques while the supporting information is still easy to find.

Review an outstanding-cheque report

Group outstanding cheques by age, such as:

• Less than 30 days
• 30 to 90 days
• 91 days to six months
• More than six months

This makes it easier to prioritize follow-ups and investigate unusual items.

Follow up before six months

Don’t wait until a cheque becomes stale-dated. Contact the payee if a cheque remains outstanding longer than expected, particularly when the amount is significant, or the payment relates to wages, refunds, or time-sensitive obligations.

Maintain an audit trail

Keep documentation for issued, cleared, cancelled, stopped, and reissued cheques. Record who approved each action and why it was taken.

Separate responsibilities where possible

Where practical, different people should authorize payments, prepare cheques, record transactions, and review bank reconciliations. This separation can help reduce errors and fraud.

Use electronic payments where appropriate

Electronic payment methods can reduce the number of cheques that become lost, delayed, or stale-dated. Businesses should still reconcile electronic payments and maintain appropriate authorization controls.

How accounting software can simplify bank reconciliation

As transaction volumes grow, identifying outstanding cheques manually becomes slower and easier to get wrong. Accounting software can bring bank transactions and recorded payments together, making exceptions easier to spot and investigate.

Depending on the product and configuration, it may allow businesses to:

• Import transactions from connected bank accounts.
• Match cleared transactions to recorded payments.
• Display unmatched or outstanding cheques.
• Review outstanding items by age.
• Identify possible duplicate payments.
• Preserve supporting documentation and audit trails.
• Reconcile multiple accounts from one system.

Automation doesn’t remove the need for review. Older or unusual items still need to be investigated, and bank-feed matches should be checked for accuracy.

Final thoughts

Outstanding cheques are a normal part of bank reconciliation, but older items shouldn’t be left unexplained.

Record cheque payments promptly, reconcile your accounts regularly, and follow up when a cheque remains outstanding longer than expected. This gives you a clearer view of available cash while helping you catch errors, prevent duplicate payments, and deal with stale-dated cheques appropriately.

Bank reconciliation software can support this process by matching bank transactions with recorded payments and bringing outstanding items to your attention sooner.

Frequently asked questions about outstanding cheques

Is an outstanding cheque added or subtracted in bank reconciliation?

When reconciling from the bank statement balance, subtract outstanding cheques because the bank hasn’t yet deducted those payments. If you are reconciling from the book balance, don’t subtract them again because they should already be reflected in your accounting records.

Does an outstanding cheque require a journal entry?

Not usually. The payment should have been recorded when the cheque was issued. During bank reconciliation, the cheque is listed as a reconciling item rather than recorded again. A separate entry may be needed if the original transaction was incorrect or the cheque is cancelled or replaced.

What happens when an outstanding cheque clears?

Once the cheque clears, match the bank transaction to the payment already recorded in your accounting system. It should then be marked as cleared and removed from the outstanding-cheque list. You don’t record the expense or payment a second time.

What is the difference between an outstanding cheque and a post-dated cheque?

An outstanding cheque has been issued and is eligible for payment but hasn’t yet cleared. A post-dated cheque carries a future date and shouldn’t be deposited before that date.

Can a Canadian bank honour a cheque that is more than six months old?

Yes. A regular cheque is generally stale-dated after six months, but it’s not necessarily invalid. The financial institution may still honour it, although it’s not obligated to do so. This is why businesses shouldn’t assume an old outstanding cheque can no longer clear.

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