How to Calculate Your Total Outstanding Checks

Calculating your total outstanding checks is a fundamental practice for maintaining accurate financial records, whether for personal finances or a small business. This process helps ensure that the balance you track in your checkbook or accounting ledger aligns with the actual funds available in your bank account. Understanding this figure is important for avoiding potential overdrafts and for making informed financial decisions.

What an Outstanding Check Represents

An outstanding check is a payment that has been written and recorded in your personal check register or accounting system but has not yet been presented to, or processed by, your bank. This situation creates a temporary difference between your internal records and the bank’s statement balance. It occurs due to the time gap between when you issue a check and when the recipient deposits it, or when the bank processes it.

Steps to Identify Outstanding Checks

To accurately identify outstanding checks, begin by gathering your bank statement for a specific period and your personal check register or accounting ledger covering the same timeframe. Once you have both documents, systematically compare the transactions. Go through each item listed on your bank statement and mark it off in your check register if it appears there. Any checks recorded in your check register that do not have a corresponding cleared transaction on the bank statement are considered outstanding. It is helpful to then create a separate list of these identified outstanding checks, noting the check number, the payee, and the exact amount for each.

How to Calculate the Total Outstanding Amount

After compiling your list of individual outstanding checks, calculating the total outstanding amount is a straightforward arithmetic process. Simply add up the monetary value of each check on your list. For instance, if you have three outstanding checks for $50, $120, and $75, the total outstanding amount would be $50 + $120 + $75 = $245. This sum represents the collective value of all checks that you have issued but which have not yet been deducted from your bank’s balance.

Using the Outstanding Check Total in Reconciliation

The calculated total of outstanding checks plays a specific role in the bank reconciliation process. To determine your true available balance, this total needs to be subtracted from the balance reported on your bank statement. This adjustment helps bridge the gap between your bank’s records and your own, leading to an adjusted bank balance. This adjusted balance should then match the balance in your checkbook or accounting records. Accurately incorporating this total into your reconciliation helps prevent overdrafts and provides a clear picture of your actual cash position.