What is a Deposit in Transit?

A deposit in transit is cash and checks that have been received and recorded by an entity, but which have not yet been recorded in the records of the bank where the funds are deposited. If this occurs at month-end, the deposit will not appear in the bank statement issued by the bank, and so becomes a reconciling item in the bank reconciliation prepared by the entity.

Why Does a Deposit in Transit Occur?

A deposit in transit occurs when a deposit arrives at the bank too late for it to be recorded that day, or if the entity mails the deposit to the bank (in which case a mail float of several days can cause an additional delay), or the entity has not yet sent the deposit to the bank at all.

The Controls Over Deposits in Transit

There are several controls related to deposits in transit that can be useful for ensuring that these funds are not lost, stolen, or improperly recorded. These controls are as follows:

Maintain a record of deposits. Maintain a daily log or ledger that details all deposits in transit, including date, amount, source, and the individual responsible for the deposit.
Segregate duties. Assign separate individuals for cash collection, deposit preparation, and reconciliation. This minimizes the risk of theft or errors going unnoticed.
Conduct a reconciliation. Reconcile bank statements with your internal records to identify any discrepancies in deposits, such as deposits in transit that the bank hasn't yet posted.
Create exception reports. Generate a report to identify any deposits that have been in transit longer than usual, which may indicate processing issues or potential errors.
Install tracking software. Use accounting software that flags deposits in transit automatically, tracks their status, and issues alerts for any overdue transactions.
Ensure deposit security. Use locked bags or secure containers for transporting deposits to the bank, minimizing the risk of loss or theft.

When is There No Deposit in Transit?

When a company uses a bank lockbox, payments go from customers straight to the bank, at which point the bank records the deposits and then notifies the company of the receipts. In this case, there is no deposit in transit, since the bank's records are updated in advance of the records maintained by the company. If the company is dilatory in recording these deposits, there could even be a reverse deposit in transit, where the bank records the information well before the company. This situation can arise when a company’s accountant is away on vacation or is otherwise occupied.

Example of a Deposit in Transit

As an example of a deposit in transit, ABC Corporation receives a check from a customer on April 30 in the amount of $25,000. It records the check as a cash receipt on the same day, and deposits the check at its bank at the end of the day. The bank does not record the check in its books until the following day, May 1. Thus, when ABC's controller completes the month-end bank reconciliation, she should add $25,000 to the cash balance shown on the bank statement in order to have it match the cash balance shown in ABC's accounting records.