DEFINITION of 'Deposit In Transit'

A deposit in transit is money that has been received by a company and sent to the bank, but has yet to be 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. 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 finances.

BREAKING DOWN 'Deposit In Transit'

Companies that have their clients send payments directly to their bank do not deal with this timing issue because the company is made aware of deposits when they are posted to their bank account. For companies that collect their own payments, in order to construct accurate financial statements, accountants must often reconcile timing differences caused by factors such as deposits in transit.

Example of Deposit 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.

  1. Bank Deposits

    Bank deposits are money placed into a deposit accounts at a banking ...
  2. Term Deposit

    A term deposit is a deposit held at a financial institution that ...
  3. Deposit Interest Rate

    The deposit interest rate is the interest rate paid to deposit ...
  4. Demand Deposit

    A demand deposit is funds held in an account which deposited ...
  5. Core Deposits

    Core deposits are the deposits that form a stable source of funds ...
  6. Deposit Slip

    A deposit slip is a small written form that is sometimes used ...
Related Articles
  1. Personal Finance

    10 Bank Promotions That Pay You To Open An Account

    Find out which banks are running cash promotions this summer.
  2. Financial Advisor

    Why Banks Don't Need Your Money to Make Loans

    Contrary to the story told in most economics textbooks, banks don't need your money to make loans, but they do want it to make those loans more profitable.
  3. Insights

    Starbucks Has More Customer Deposits than Many Banks (SBUX)

    Recent financial analysis conducted by Standard & Poors shows that Starbuck's holds more customer deposits than several American banks.
  4. Personal Finance

    The History Of The FDIC

    Find out why this corporation was developed and how it protects depositors from bank failure.
  5. Personal Finance

    What is Fractional Reserve Banking?

    Fractional reserve banking is the banking system most countries use today.
  6. Personal Finance

    Get the Best Savings Interest Rates For You

    How do you choose between market deposit accounts, CDs and traditional savings accounts?
  7. Personal Finance

    Handling High-Yield Savings Accounts

    Is this the savings route for you? Read on to find out what these accounts have to offer.
  8. Small Business

    Best Checking Accounts For Small Businesses

    What you need to know to choose the best checking account for your small business – and where to look.
  9. Investing

    Debt Mutual Funds Vs. Fixed Deposits

    Learn about the advantages and disadvantages of debt-oriented mutual funds and fixed deposit accounts, including how each investment generates income.
  1. What proportion of my income should I put into my demand deposit account?

    Find out how much money to keep in your liquid demand deposit accounts, such as checking or savings accounts, and discover ... Read Answer >>
  2. What determines the interest rate in my money market account?

    Placing funds in a money market account may provide a higher interest rate than a savings account due to the underlying securities ... Read Answer >>
  3. How must banks use the deposit multiplier when calculating their reserves?

    Explore the relationship between the deposit multiplier and the reserve requirement, and learn how this limits the extent ... Read Answer >>
Hot Definitions
  1. Perfect Competition

    Pure or perfect competition is a theoretical market structure in which a number of criteria such as perfect information and ...
  2. Compound Interest

    Compound Interest is interest calculated on the initial principal and also on the accumulated interest of previous periods ...
  3. Income Statement

    A financial statement that measures a company's financial performance over a specific accounting period. Financial performance ...
  4. Leverage Ratio

    A leverage ratio is any one of several financial measurements that look at how much capital comes in the form of debt, or ...
  5. Annuity

    An annuity is a financial product that pays out a fixed stream of payments to an individual, primarily used as an income ...
  6. Restricted Stock Unit - RSU

    A restricted stock unit is a compensation issued by an employer to an employee in the form of company stock.
Trading Center