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Cheques issued and recorded in the cash book have not been paid by the bank, so the cash book balance is lower than the passbook.
List each issued cheque not debited by the statement date as an outstanding item; add it back when reconciling from the cash book; age it to decide follow-up.
House ageing bands: 0 to 30 days normal, 30 to 60 days call the payee, 60 to 90 days escalate, beyond three months from cheque date treat as stale.
A BRS schedule of outstanding cheques with number, payee, date, amount and age, clearing next month or moving to stale-cheque treatment.
An outstanding (or unpresented) cheque is one you have issued and entered in your cash book that the payee has not yet banked, or that the bank has not yet paid. Your books show the money gone; the passbook does not. In a bank reconciliation statement (BRS) starting from the cash book, you add it back.
Why does an outstanding cheque make the cash book lower than the passbook?
A cheque passes through several stages between your desk and your bank statement. Your cash book records it at the first stage. The bank records it only at the last.
| Stage | What happens | Cash book | Passbook |
|---|---|---|---|
| 1. Written and recorded | You write the cheque and pass the payment entry | Money shown as paid | No entry |
| 2. Handed over | Payee receives it | Paid | No entry |
| 3. Deposited | Payee banks it at their own bank | Paid | No entry |
| 4. Presented through CTS | The cheque image reaches your bank through the Cheque Truncation System | Paid | No entry yet |
| 5. Paid | Your bank debits your account | Paid | Debit appears |
Between stage 1 and stage 5, your cash book is lower than the passbook by the cheque amount. If your statement date falls in that window, the cheque is outstanding.
Worked example
A small manufacturer writes a ₹36,000 cheque to a packaging supplier on 29 March and records it immediately. The supplier deposits it in April, and the manufacturer’s bank pays it on 5 April.
On 31 March:
- Cash book balance: ₹2,35,000
- Passbook balance: ₹2,71,000
Gap: ₹2,71,000 − ₹2,35,000 = ₹36,000, the unpresented cheque.
| BRS as at 31 March | ₹ |
|---|---|
| Balance as per cash book | 2,35,000 |
| Add: cheque no. 004781 issued 29 March, not yet presented | 36,000 |
| Balance as per passbook | 2,71,000 |
No journal entry is needed. When the April statement shows the ₹36,000 debit on 5 April, tick it against the March entry and the item drops out.
How long can a cheque stay outstanding before you must act?
A cheque in India is valid for three months from the date written on it, under an RBI instruction in force since 1 April 2012. After that it is stale, and the bank will not pay it. Before then, you have time to follow up. A simple house rule:
| Age from cheque date | What to do (typical practice) |
|---|---|
| 0 to 30 days | Normal. Keep it in the BRS. |
| 30 to 60 days | Call the payee. Have they received it? Do they plan to bank it? |
| 60 to 90 days | Escalate. Decide whether to stop payment and pay another way. |
| Beyond three months | Stale. Reverse the payment in your books and reissue if the money is still owed. |
Do not wait until the cheque goes stale to find out it was lost in the post. A supplier who says “we never got it” at day 85 has been unpaid for nearly three months.
Why do auditors look at outstanding cheques?
Long lists of old outstanding cheques can hide problems. A cheque written at year-end but held back to make the bank balance look lower than it is, a duplicate payment entry, or a cheque that was never actually issued all look like outstanding cheques. Auditors check that year-end outstanding cheques were paid soon after the year-end. Keeping your list short and current makes that easy.
What to read next
- Next in this series: Stale cheque in India: validity and treatment in books
- Go deeper: Bank reconciliation statement (BRS) in India: format and preparation
- Go deeper: Reconciliation errors: missing and mistimed entries
- For teams: Bank reconciliation software for India
TransactIG matches bank statement lines to the books and keeps unpresented cheques in an exception queue with their age, so old items surface before the auditor finds them.