What type of cheques is that which is issued by a firm but not yet presented to the bank?

Question

What type of cheques is that which is issued by a firm but not yet presented to the bank?

1. A. Uncredited cheques
2. B. Outstanding cheques (Correct answer)
3. C. Uncollected cheques
4. D. Bounced cheques

Correct Answer

Option B — Outstanding cheques

Detailed Solution & Explanation

The correct answer is Outstanding cheques.

Key Points

• Outstanding cheques (also called unpresented cheques) are cheques issued/written by a firm but not yet presented to or cleared by the bank.

Additional Information

• Outstanding (unpresented) cheques have been recorded as payments by the firm but not yet cleared by the bank, so the cash book shows a lower balance than the passbook.
• When reconciling from the passbook, they are subtracted; their mirror image, deposits in transit, are added.
• A cheque generally stays valid for three months from its date, after which it is stale and the bank will refuse it.
• Persistently unpresented cheques are eventually written back into the books, since the liability has not in fact been discharged.