Definition
The term deposits in transit refers to cash that has been recorded as received by a company, sent to their bank account, but not yet posted to the account's statement by the bank. Deposits in transit are typically identified as part of the bank account reconciliation process.
Explanation
At the end of each accounting period, companies go through a bank statement reconciliation process to understand any differences between the company's record of cash deposits and withdrawals, and the account statement issued by the bank. Oftentimes, cash will be received by a company, recorded in the general ledger, but not yet shown on the company's bank statement.
For example, cash may have been received and recorded by a company on December 31. However, due to the time necessary to process the deposit by the bank, this cash will not appear on the company's December bank statement. The reconciliation process will identify this difference as a deposit in transit.
This reconciliation process is part of the accounting cycle, allowing the company to accurately report cash, a current asset, on its balance sheet.
Example
Company A recorded $100,000 in cash deposits made to its general checking account in the month of June. During the May bank statement reconciliation process, Company A determined it had a balance of $6,000 in deposits in transit. The bank statement received by Company A showed total deposits of $102,000 in June. Company A's deposits in transit at the end of June would be calculated as:
Deposits in Transit (Starting Balance) | $6,000 |
Add: Cash Deposits | $100,000 |
Total Deposits | $106,000 |
Less: Total Deposits (Per Bank Statement) | $102,000 |
Deposits in Transit (Ending Balance) | $4,000 |
Related Terms
The term accounting cycle refers to the framework and processes followed in each accounting period. The accounting cycle begins with the identification of events and transactions, and ends with the after-close trial balance.
Moneyzine EditorNovember 6th, 2024
The financial accounting term current assets is generally defined as cash and other assets that can be converted into cash within one year or one operating cycle, whichever is longer. Current assets are a subcategory of assets, which appear on a company's balance sheet.Moneyzine EditorNovember 6th, 2024
As it applies to the accounting discipline, cash includes paper money, coins, checks, money orders, and money on deposit with banks. In general, an item is classified as cash if a bank will accept it for deposit.Moneyzine EditorNovember 6th, 2024- The financial accounting term reconciliation of bank account balances refers to the process of understanding the difference between the company's records of cash in their account, and the amount appearing on a statement received from the bank.Moneyzine EditorNovember 6th, 2024
The term bank charges and fees refers to the costs applied to an account balance for services such as bank checks, non-sufficient-funds (NSF) check processing, safe deposit box rentals, and overdraft protection. Bank charges and fees are typically identified as part of the bank account reconciliation process.Moneyzine EditorNovember 6th, 2024
The term cash over and short refers to an expense account that is used to report overages and shortages to an imprest account such as petty cash. The cash over and short account is used to record the difference between the expected cash balance and the actual cash balance in the imprest account.Moneyzine EditorJanuary 10th, 2024- The term outstanding checks refers to those checks that have been recorded by a company as being written, but not yet cleared and posted to the account's statement by the company's bank. Outstanding checks are typically identified as part of the bank account reconciliation process.Moneyzine EditorSeptember 20th, 2023
The financial accounting term bank credits refers to deposits made to an account such as interest income on a certificate of deposit, or the collection of notes payable. Bank credits are typically identified as part of the monthly bank account reconciliation process.Moneyzine EditorNovember 6th, 2024
