Deposit in transit,
Definition of Deposit in transit:
A transit item is any check or draft that is issued by an institution other than the bank where it is to be deposited. Transit items are separated from internal transactions involving checks that were written by a bank's own customers. Transit items are submitted to the drawee's bank through either direct presentation or via a local clearing house.
Funds that have not yet made it to the bank account of the depositor yet, however, they have been sent to the bank. Thus, the processing and posting of the funds to the depositors account has not yet occurred.
A deposit in transit is money that has been received by a company and recorded in the company's accounting system. The deposit has already been sent to the bank, but it has yet to be processed and posted to the bank account. In financial accounting, these funds are reflected in the company's cash balance on the day the deposit is received, even though it may take the bank several days to process the deposit and post it to the bank balance. The term "deposit in transit" is used to categorize this cash entry and keep track of timing differences that may otherwise cause difficulty in reconciling the company's cash balance on its financial statements to its monthly bank statements.
How to use Deposit in transit in a sentence?
- Marking these payments as "deposits in transit" accounts for timing differences that may arise from this process.
- While bank balances will often reflect deposits immediately, funds may not be available for several business days while the clearing process happens.
- A "deposit in transit" is an accounting term that refers to checks or other non-cash payments that a company received and recorded in its accounting system, but which have not yet been cleared by its bank.
- Deposits in transit are a major part of bank reconciliations, in which an accountant completes a monthly reconciliation of the cash figure on the company's balance sheet to the bank balance reflected on the bank statement.
Meaning of Deposit in transit & Deposit in transit Definition