 in this discussion we will discuss the discussion question of describe outstanding items as it relates to bank reconciliations so when talking about outstanding items we are talking about them in relation to a bank reconciliation so we may first want to start there we may first want to start with what is a bank reconciliation it's reconciliation it's everything and remember the bank reconciliation is going to be the process of reconciling what is on a bank statement the document from the bank recording the activity for a month's time period and what is on the books for that same point in time so the bank statement is going to be for as of the end of the month let's say the end of December 1231 and then we're going to have our information on the books as of the end of December for the checking account and those two amounts of course will not be in balance you would think they would but they're never going to be in balance even if it was a perfect system unless there was no outstanding items because there's going to be issues of checks that we have issued that haven't cleared the bank just timing differences and there's going to be issues in terms of deposits possibly as well and that's what we're talking about here so our goal here is to reconcile as of a point in time the end of the point in time of the bank reconciliation and to our books at that same point in time and know exactly what those differences are and if we can do so then we have good assurance that all the information that is on the bank statement we have recorded and recorded properly and have a double check for that huge internal control very relevant thing to do so then the outstanding items then are going to be the key differences that's going to be the differences between what the bank statement has what the bank says the balance is at a certain point in time and what the books say it is at a certain point in time now we typically would think of outstanding checks and uh and outstanding deposits are two types of ways we can think of outstanding items so it's kind of a broad term uh so we would think of deposits that haven't cleared the bank yet and outstanding item outstanding checks now the outstanding checks of course are going to be those checks that we wrote at at some point in time if we're talking about the month of December we wrote them sometime in December possibly like you know probably at the end of December towards the end that have not yet cleared so if we wrote it on December 25th we got the bank statement for the month ended December 31st and that check is not on the bank statement well that means that it just hasn't cleared yet so we're not really wrong in the recording of the check because we know we we recorded the check we know that our bank account should be decreased by that amount but it hasn't been cleared why because it takes some time for the check to go to the other person or a company and they have to deposit it into their checking account and then they have to notify our bank that the money has been taken out and that could take some time to do so and therefore uh there's going to be this timing difference our goal here is just to record that timing difference now that the checks could that could be a pretty long time difference depending on who we're giving the check to some people cash to check very quickly others take some time to cash the check and therefore we could have outstanding items for some time on the other side of things we could have the outstanding deposits and that's the same thing if we go to the bank and we put the money into the into the bank at this point in time possibly December 31st let's say and then we check the bank statement as of the month ended December 31st and there's no activity for it being deposited yet then we we uh it's probably just a timing difference we're going to record that as something outstanding it will be deposited soon now note that the deposits should clear pretty quickly these days so so if the outstanding deposit is more than like three days then it's probably a bit of a worry if we want to check either the outstanding checks or the outstanding deposits however we can easily just go to the bank and see okay if it didn't clear in December did it clear in January and go to the bank and just ask them that and if it cleared in January then it's just a timing difference something that we're going to record on our bank statement for the outstanding items on the bank reconciliation they will be recorded of course on the bank side of things not because the bank got it wrong but they just don't have all the information yet we do so we're going to say the the bank balance is going to be whatever it is on our bank reconciliation and the bank balance is not including outstanding checks so therefore it's too high the bank balance is too high by the fact that they didn't include the checks yet because they haven't yet known about them therefore we would have to decrease the bank balance by the outstanding checks and then the uh the outstanding deposits of course are deposits that the bank doesn't know about yet we do so our books are higher already by the deposits we have made into our account the banks are not and therefore we're going to increase the bank balance by and our bank reconciliation by the outstanding deposits and that's really the essence of the bank reconciliation it should be and there's probably not going to be a whole lot of errors or anything like that and once we make the adjustments on our side for the things that we have to enter to the books on our side the remaining relevance of the bank reconciliation is typically going to be the beginning balance of the of the bank balance and then we're going to have to take away from that the outstanding checks add to that the outstanding deposits and that'll give us the bank balance that will be matching then our book balance after we make the adjustments for any things on our side of the of the system after we make the journal entries related to uh any things that we have discovered that we have not yet recorded in the bank reconciliation process