What is the most correct treatment for the Outstanding cheques that appear in the bank reconciliation at the end of financial year ?

If the cheques have been delivered and received by the supplier, keep those as reconciliation items (consider it out of your cash at year end), and If you still have the custody of the cheques, better to reverse them back the payable account not to deferred cheques, because by those transactions you are reducing you cash balances by fake transaction)

For reconciliation purposes, it will be deducted to the bank's side. There's no adjustment or entries needed on the company's book. The said checks will reflect on the bank on the first banking day of the subsequent year.

I agree with Mr. Islam Refaat.

Just keep it in the Bank Reconciliation Statement.