Treatment of uncleared cheques in bank reconciliation statement

What are uncleared or uncollected or uncredited cheques/checks

All those cheques which have been deposited by the customer, but the amount of which has not been collected or credited by the bank in customer’s, account, till the date on which Bank Statement is issued are called uncleared cheques/checks.

Effect of uncleared cheques on bank balance

Whenever a cheque received from a debtor or third party, is deposited into the bank for collection, it is immediately recorded in bank column on the debit side of Cash Book. In Cash Book, the bank balance is increased on the same day when a cheque is deposited. The bank, however, will take some time in collecting the cheque. Bank would credit the customer’s account only when the amount would be collected from the debtor’s bank. Until the cheque has been collected, the bank balance appearing in Bank Statement would be less than the balance appearing in the Cash Book (Bank Column).


Example

Suppose on 20 January 2019, balance as per Cash Book and Bank Statement is $10,000. On the same day, a cheque amounting to $5,000 received from a debtor Harry and same deposited into bank for collection. The amount of the cheque is not collected by the bank till 31st January 2019 and Bank Statement is sent by bank on that date.

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Treatment of uncleared cheqeus in bank reconciliation statement

Treatment of uncleared cheqeus in bank reconciliation statement example

It should be noted that the bank column of the Cash Book is showing bank balance of $15,000 at the end of the month. According to Bank statement, the balance is $10,000. The discrepancy of $5,000 is due to uncollected cheque. Thus when cheques are uncollected, uncleared or uncredited, Cash Book shows more bank balance as compared to Bank Statement.

Treatment of uncleared cheques in bank reconciliation statement

It has been proved that Cash Book shows more bank balance as compare to Bank Statement, when
cheques are uncredited. Though, it is a temporary discrepancy, because ultimately the amount of uncollected cheque will be collected and credited. But on the other hand, it is a fact that on the date of Bank statement, that the amount of deposited cheque was not in our bank account. That’s why Bank Statement shows less bank balance as compare to Cash Book. Thus we have to credit the amount of uncredited cheques while preparing Bank Reconciliation Statement to bring down the balance at the level of Bank Statement.

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