What does "uncleared cheque" refer to in bank reconciliation?

An "uncleared cheque" refers to cheques that have been issued and deducted from the issuer's accounting records but have not yet been processed by the bank and reflected in the bank statement. This situation occurs when a payee has not yet presented the cheque for payment, meaning the bank has not yet honored the transaction. This timing difference is important in bank reconciliation because it affects the cash balance that needs to be reconciled between the company's records and the bank's records.

Cheques being paid out of the account but not cleared on the bank statement signifies that while the funds are indeed withdrawn from the issuer's perspective, the bank has not yet taken the necessary action to process the payment, resulting in a discrepancy that needs to be accounted for during reconciliation. Monitoring these uncleared cheques is essential for maintaining accurate financial records and for ensuring a clear understanding of cash flow.