Deposit In Transit

DEFINITION of 'Deposit In Transit'

A deposit in transit is money that has been received by a company and sent to the bank, but which has not yet been processed and posted to the account by the bank. In financial accounting, these deposits 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 balance.

BREAKING DOWN 'Deposit In Transit'

In order to construct accurate financial statements, accountants must often reconcile timing differences caused by factors such as deposits in transit. For example, a company may receive a $10,000 deposit in its bank account on December 31. However, the bank may mark the deposit as "pending" and not increase the account's balance by the $10,000 until it has finished processing it, several days later. Now suppose the company needs to report its cash balance as of the year end. In this case, it is proper to count this $10,000 deposit in transit as being in cash as of the year end, even though the bank did not post it to the balance until later.