Want to learn more examples of bank reconciliation deposits in transit? Read on.
As you review your bank transactions, you may come across instances where deposits you made have not yet been credited to your account.
The cash balance per bank is lower than expected.
These outstanding deposits, known as deposits in transit, are an essential element in ensuring your bank reconciliation accurately reflects your actual balance.
Deposit in transit
A deposit in transit is added to the bank balance to calculate the adjusted balance.
By understanding and properly accounting for deposits in transit, you can maintain accurate financial records and prevent any discrepancies in your accounts.
Deposits in transit are those deposits that you have made but have not yet appeared on your bank statement.
Due to the timing differences between your deposit and the bank’s processing, these deposits are recorded as outstanding items on your bank reconciliation.
Here are the examples that illustrate the concept of deposits in transit:
1. Check deposit near the statement’s cutoff date
In this example of a deposit in transit, related to bank reconciliation, we look at a check deposit made near the end of the month.
Imagine you made a check deposit at your bank on the last day of the month, recorded in the cash book, and your bank statement was generated the following day.
Since the bank statement is generated daily or periodically, it would not include the deposit you made on the last day of the month.
In this case, the deposit would be considered a deposit in transit, as it has not yet cleared the bank.
The deposit is included in the book balance through journal entries, but not yet in the bank statement.
2. Weekend or holiday delays
With this example, discussing bank reconciliation, we look at how a weekend or holiday creates a deposit in transit.
If you deposited on a Friday evening or during a weekend, it may not be credited to your account until the next business day.
Similarly, if you deposited on a public holiday, it might take an extra day for the deposit to be credited to your account.
In such instances, the deposits would appear as deposits in transit until the bank processes them and includes them in your bank statement.
3. Delayed Mail Deposits
Delayed mail deposits, as an example, do create a deposit in transit in a bank reconciliation.
Sometimes, you may mail your deposits to the bank, and there may be delays in the postal system.
For example, you drop your deposit envelope in a mailbox on Monday, but due to unforeseen circumstances, it takes an extra day or two to reach the bank.
Until the bank receives and processes the deposit, it would be considered a deposit in transit.
4. Remote Deposit Capture Delay
Remote deposit capture delay is one of the causes of deposits in transit relative to bank reconciliation, see the example:
Many banks nowadays provide the convenience of remote deposit capture, allowing you to deposit checks using your smartphone or a scanner.
However, even with this convenient method, there might still be a delay in the bank’s processing.
The deposit will not be considered cleared until the bank processes and credits the amount to your account.
5. Bank Processing Delays
Bank processing delays, in terms of bank reconciliation, may result in the occurrence of deposits in transit, this is an example:
Occasionally, banks may experience processing delays due to system issues, high volumes of deposits, or other operational reasons.
In such situations, the bank may not post your deposit immediately, resulting in a delay until the deposit is reflected on your bank statement.
Until the bank processes the deposit, it remains a deposit in transit.
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