A store deposits Friday's receipts in the night drop. The bank posts them Monday. If Friday is the last day of the month, the entity's books show the cash and the bank statement does not.
Nothing is wrong on the books. The entity received the money and recorded it. The bank simply has not caught up. So the correction goes on the bank side of the reconciliation, added to the bank balance, and no journal entry follows.
Finding them is mechanical. Compare the entity's recorded deposits against the deposits on the statement. Anything recorded but not on the statement is in transit. A deposit in transit that was also in transit at the previous month end and still has not posted is a different problem, and worth asking about.
Suppose the bank statement shows $91,450 and a valid $12,000 deposit is still in transit. Add the deposit on the bank side before considering outstanding checks. Preserve the deposit record, bank cutoff, and later posting evidence. Do not add $12,000 to the ledger again. A long delay can indicate the wrong bank account, a cutoff error, or a missing deposit rather than ordinary timing.
Put the concept to work
Understand this concept
- Explain what a deposit in transit is and why it adjusts the bank side of a reconciliation rather than the book side.
Apply this concept
- Identify deposits in transit by comparing the entity's receipts with the bank statement, and place them on the reconciliation with the correct sign.
Learning resources
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Build on these ideas
- Bank reconciliation — Understand
To understand this concept: Required. The item is defined by its place on the reconciliation.
- Deposit in transit — Understand
To apply this concept: Required. Placing the item requires knowing which side it belongs on.
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Practice
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Use this idea next
- Bank reconciliation — Apply
Required level here: apply. Required. Deposits in transit are one of the two standard bank-side timing items.
- Deposit in transit — Apply
Required level here: understand. Required. Placing the item requires knowing which side it belongs on.