Outstanding checks
In one sentenceChecks the business wrote to its suppliers or others and recorded in its books, but whose holders have not yet presented them to the bank, so they have not been deducted from the statement balance.
Simply put
As soon as you hand over the check, you deduct it from the bank balance in your books, but the bank deducts it only when it is presented for payment. That is why the statement balance looks higher than your books.
In the reconciliation you subtract them from the statement balance. Do not rely on the statement balance alone when paying, because part of it may be committed to checks that will be presented soon.
Worked example
A pharmacy's balance on the bank statement is 200,000 SAR. It issued two checks to suppliers totaling 35,000 SAR that have not yet been presented, and its balance in the books is 165,000 SAR.
Balance per statement200,000
− Outstanding checks(35,000)
Balance per books165,000
Adjusted statement balance = 200,000 − 35,000 (matches the books)165,000 SAR
Don't confuse it with
Checks under collectionOutstanding checks are subtracted from the statement, while checks under collection are added to it.