bank reconciliation

I have personally audited companies and different persons may have different opinions how sp ever your treatment is perfectly correct as you have already given cheque to the party with specified amount which indicate almost definite outflow of funds also subsequent clearance is a confirmation to the situation which existed in period covered only.!! So I suggest your option is better over the other

Yes... You are exactly correct.
The balance will be shown as per Your bank book. Not as per bank statement...