Deposit in Transit
A deposit in transit, also known as an un-cleared deposit, is a cash or check deposit that is recorded in the accounting system of a firm but not in the bank’s records.
A deposit in transit often occurs when there is a time lag between when the firm registers the deposit in their accounting software and when the money is received by the bank and reflected in the account. Depending on the deposit, this process might take several days or perhaps a week.
Deposit in Transit in Bank Reconciliation
Companies go through a bank statement reconciliation procedure at the conclusion of each accounting period to comprehend any inconsistencies between the company’s record of cash deposits and withdrawals and the account statement supplied by the bank.
Cash is frequently received by a firm, recorded in the general ledger, but not yet reflected on the company’s bank statement.
A firm, for example, may have received and recorded cash on December 31. However, due to the time required by the bank to complete the deposit, this cash will not appear on the company’s December bank statement. This disparity will be identified as a deposit in transit throughout the reconciliation procedure.
During the bank reconciliation procedure, both deposits in transit and outstanding checks are added to the amount per the bank statement.
During the bank reconciliation process, deposits in transit are subtracted from the amount on the bank statement, and outstanding checks are added to the balance on the bank statement.
This occurs at the conclusion of the month when the bank sends the company a statement listing all of the amounts they have recorded.
At the conclusion of each period, the bank statement balance and the book balance must be reconciled to account for deposits in transit and outstanding checks.
This reconciliation procedure is part of the accounting cycle and enables the corporation to appropriately record cash, a current asset, on its balance sheet.
Deposit in Transit Example
For example, on April 30, XYZ Corporation gets a check for $30,000 from a client. It records the check as a cash receipt on the same day and deposits it at the end of the day at its bank. The cheque is not recorded in the bank’s books until the next day, May 1.
As a result, when XYZ’s controller completes the month-end bank reconciliation, he/she should add $30,000 to the cash balance indicated on the bank statement to match the cash balance recorded in XYZ’s accounting records.
Deposit in Transit Journal Entry
If the corporation transfers money from cash on hand to cash at the bank, the record of deposit in transit affects both accounts.
The corporation will record a journal entry debiting cash at the bank and crediting cash on hand.
| Date | Particular | L/F | Debit | Credit |
| XXXX | Cash at Bank | $$$$ | ||
| Cash on Hand | $$$$$ | |||
As the cash moves to the bank, the transaction reduces cash on hand while increasing cash at the bank.
If the firm gets a cash deposit slip from a supplier who claims to have settled our accounts payable.
To reduce assets, the corporation will debit cash at the bank and credit accounts receivable.
| Date | Particular | L/F | Debit | Credit |
| XXXX | Cash at Bank | $$$$ | ||
| Account Receivable | $$$$$ | |||
Why does it Take so Long for Deposits to Clear?
Banks will hold new deposits to ensure that the sender’s account has accessible funds or that the cheque payment is valid. The deposit is considered to be “in transit” at this period, and it might take several business days to clear.
Deposit in Transit Vs Outstanding Check
Deposits in transit are those made after the bank statement was released yet reflected on the books.
Outstanding checks are those that have been written and recorded on the books but have yet to be cashed or cleared by the bank.
For more click here and if you are looking for full forms of different acronyms and words then check out this list you really gonna find this helpful. We also have an Essay on every topic, Check the complete list here. If you are Studying in Matric Free Video Lectures of Maths, Physics and English are here, and we have got you covered for I.COM Business Maths also.
