All cheques start as unpresented cheques, but the waiting time for them to clear can differ between banks. An unpresented cheque simply means that a cheque has been written and accounted for, but it has not yet been paid out by the bank from which the money is being drawn. Unpresented cheques are also referred to as outstanding cheques because the funds in question are, as the name suggests, outstanding.
What is an unpresented cheque in accounting?
In accounting terms, unpresented cheques are cheques that have already been entered into the company records, despite not having been drawn from the bank. It is important to record these “promises to pay” once the cheque is issued, rather than waiting until the money is cleared, because it gives a more accurate impression of the total amount of disposable money available to the business. This is referred to as accrual-basis accounting (in contrast to cash-basis accounting).
How do you treat unpresented cheques?
Because the cash amount represented by the cheque has not yet been withdrawn from the account, it is essential to note there will be a disparity in the amount showing on the checking account statement and the amount available to the company. As such, the actual amount remaining can be worked out by deducting the amount the cheque is worth from the statement shown. This is why it is important that your books record both the amount in value terms of the unpresented cheque and the fact that it is unpresented and thus needs to be subtracted from your account figures.
What is the effect of an unpresented cheque on a balance sheet?
Your balance sheet needs to represent an accurate figure for your company’s bank accounts, and so it will need to be adjusted to account for unpresented cheques. You can do this via a bank reconciliation statement, which helps you identify and explain any disparities between the company accounts and the bank accounts. This includes unpresented cheques, which may have been marked as bills paid and may already have been subtracted from your company accounts, but which will not yet be showing on your bank accounts as the money has not been drawn.
What’s the difference between unpresented cheques and outstanding lodgements?
Outstanding lodgements are, effectively, the opposite of unpresented cheques. While unpresented cheques represent money that will be drawn from the company account in due course, outstanding lodgements represent money that has been paid into an account but have not yet been recorded on the bank statement. Therefore, an outstanding lodgement is money that is available to the company, although it’s not yet visible. This is another example of disparities between bank accounts and company accounts, and so should be accurately recorded for clarity.
What’s the difference between an unpresented cheque and an uncredited cheque?
As with outstanding lodgements, uncredited cheques represent money that is available to the company but has not yet been recognised by the bank. This comes in the form of cheques paid in by customers and clients. Uncredited cheques are sometimes referred to as uncollected cheques or uncleared cheques, but these three terms all amount to the same thing. Once again, this represents a potential imbalance between the company accounts and the bank account, depending on your payment methods and accounting practices.
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