What is Uncleared Cheque?
A cheque that has been written and recorded in the payer's records but has not yet been paid by the bank on which it is drawn is known as an uncleared cheque.
A cheque (check) that has been written and recorded in the payer’s records but has not yet been paid by the bank on which it is drawn is known as an uncleared cheque. An uncleared cheque is referred to as an outstanding check in accounting textbooks in the United States.
How to record uncleared cheque in the book of accounts?
To arrive at the correct or adjusted balance per bank, an uncleared cheque (or outstanding check) is deducted from the balance shown on the bank statement during the bank reconciliation process.
When a check is received from a debtor or a third party and deposited into the bank for collection, it is immediately entered into the bank column on the debit side of the cash book. The bank balance in the cash book rises on the day the check is deposited. The bank, on the other hand, requires time to process the check. Only after the amount has been collected from the debtor’s bank will the bank credit the customer’s account.
Until the check is cashed, the bank balance shown on the bank statement will be less than the balance shown in the cash book’s bank column.
When checks are not credited, the cash book will show a higher bank balance than the bank statement. The difference, however, is only temporary because the amount of the uncollected check will eventually be collected and credited.
However, the amount of the deposited check was not shown in the bank account on the date of the bank statement. As a result, the bank statement shows a lower bank balance than the cash book.
As a result, when preparing a bank reconciliation statement, it is necessary to credit the total amount of any uncredited