Want to learn deposit in transit examples?
Read on.
Written By Kevin Mil - Author/Founder
What is included in a deposit in transit?
Let’s define a deposit in transit before exploring examples.
A deposit in transit refers to a payment a company has received and deposited in the bank, but which has not yet cleared.
It’s important to emphasize that these deposits have actually been made at the bank, distinguishing them from collections still held in the treasury department or by the cashier.
Many people mistakenly believe that deposits in transit include funds still in the treasurer’s possession, which is a common misconception.
In reality, deposits in transit specifically refer to funds that have left the company’s direct control and are in the banking system, awaiting final processing and clearance.
Here are the deposits in transit examples:
1.Checks Received Last Day of the Month
Checks received on the last day of the month typically constitute the most common deposits in transit.
This occurs because banks often require a clearing period, usually lasting three days, though some institutions may process checks within one day.
Due to this clearing period, checks deposited at month-end are generally cleared in the following month.
Consequently, these transactions appear as deposits in transit when preparing a bank reconciliation statement.
The timing discrepancy between when a company records a deposit and when the bank processes it creates this common reconciling item, highlighting the importance of accurate timing in financial record-keeping.
2.Deposits after Bank’s Cutoff
Deposits made near the end of the month may appear on the following month’s bank statement if they occur after the bank’s cutoff time, typically around 12 PM.
Despite this timing issue, these transactions are still considered valid deposits and are included in the bank reconciliation process as deposits in transit.
This situation is similar to other end-of-month transactions that may cross over to the next statement period.
3.Mailing Deposits
In remote areas where banks are far away, particularly in mountainous regions and isolated locations, residents can still make deposits through the mail.
This method provides a viable solution for people living in places without nearby banking facilities, ensuring they can maintain their financial activities despite geographical challenges.
4.Banks ATM Deposits
Many banks provide their clients with the convenience of making deposits through ATM machines, which can both dispense cash and accept deposits.
However, these deposits may not immediately appear on bank statements due to the verification process.
The bank typically needs to confirm the receipt of funds, which can occur during the same day or on the following banking day.
This necessary verification step often results in a delay between the time of deposit and when the transaction is reflected in the customer’s account statement.
5.Fund Transfers during Weekends/Holdiays
When you receive a fund transfer during weekends or holidays, you might notice an increase in your balance when checking your online banking app.
Interestingly, while the balance shows the increase, the transaction often doesn’t appear in the list of recent activities.
Although you can use the money immediately, the bank statement typically reflects the transfer on the next banking day.
This discrepancy occurs because banks process most transactions only on business days.
As a result, transfers made outside regular banking hours are usually recorded in the bank’s system on the following business day, even though the funds are available for use as soon as they’re received.