Which term describes checks that have been issued but not yet presented to the bank for payment?

• A. Cleared checks
• B. Cancelled checks
• C. Outstanding checks
• D. Deposits in transit

Answer: (C)

Outstanding checks are checks that have been issued and recorded by the company, but have not yet been presented to the bank for payment. Because the bank hasn’t debited the company’s account, the bank statement shows a higher cash balance than the company’s books. In a bank reconciliation, these checks are subtracted from the bank balance to reflect the true amount available per the company’s books. Cleared or paid checks have already reduced the bank balance, cancelled checks are those that have been paid and ceased to exist, and deposits in transit are amounts the company has recorded but the bank hasn’t yet credited.