Deposit in Transit Journal Entry

Deposit in transit is the amount of cash or check that is already recorded in company financial statement but not yet reflected in the bank statement. The deposit was already sent to the bank, however, it was not processed and shown in the bank statement.

Deposit in transit may be the result of company transferring funds from cash on hand to cash at bank. Accountant has to deposit cash to the bank at the end of the day. The accountant has recorded the transaction in the financial statement, but the bank has not yet shown it on the statement. The bank only issues the deposit slip to accountant as the proof of cash received.

Another cause of deposit in transit, the other parties have deposited cash into the company bank account, but the bank has not yet recorded the transaction. The bank only issues the deposit slip and supplier passes the document to prove the payment to us. The company’s accountant uses the deposit slip as proof of payment collection.

The company already record the deposit in transit however it is not yet shown in the bank statement. So it will make the difference between the balance on balance sheet and bank statement.

Deposit in Transit Journal Entry

If the company moves cash from cash on hand to cash at bank, the record of deposit in transit will impact both accounts.

The company will make journal entry of debiting cash at bank and credit cash on hand.

Account Debit Credit
Cash at Bank $$$
Cash on Hand $$$

The transaction will decrease cash on hand and increase cash at bank as the cash has moved to bank.

If the company receives the cash deposit slip from the supplier who claims to settle the accounts payable with us.

The company will debit cash at bank and credit accounts receivable to decrease the assets.

Account Debit Credit
Cash at Bank $$$
Accounts Receivable $$$

The transaction will decrease the accounts receivable and credit cash at bank while the bank does not reflect the transaction yet.

Deposit in Transit Journal Entry Example

Company ABC is a retail store, most of the sales are made in cash so the accountant needs to deposit to the bank on a weekly basis. On 31 Jan 202X, accountant bring $1,000 cash on hand to deposit into the company bank account. However, it was Friday and the bank had not yet credited the cash into the statement. However, the bank issue deposit slips as the evidence for accountant.

ABC has recorded the transfer to cash from cash on hand account to cash at bank account. Accountant has to debit cash at bank $ 1,000 and credit cash on hand $ 1,000.

Account Debit Credit
Cash at Bank 1,000
Cash on Hand 1,000

This transaction moves the cash $ 1,000 from cash on hand to cash at bank even the bank statement does not yet show this amount yet. On the same date, the balance in the bank is $ 1,000 less than the company record.

Example 2

Company XYZ is a manufacture that produces cloth and shoe for many customers. In order to make good relationship with customers, the company always allow them to purchase on credit. On 01 April 202X, the company receives a cheque of $ 50,000 from a customer to settle the outstanding balance. Accountant brings the cheque to the bank, but it belongs to other banks so it requires a few days to clear the balance. After depositing a check, the bank needs to clear with central bank and it does not yet reflect the balance on bank statement.

Accountant needs to record cash and clear accounts receivable with the customer. Even the cash has not yet been debited into bank account, but we already received check from customer. If the check is not valid, we can use it to sue the issuer to the court, which is a rare case.

The company makes journal entry by debiting cash at bank $ 50,000 and credit accounts receivable.

Account Debit Credit
Cash at Bank 50,000
Accounts Receivable 50,000

This transaction will settle the accounts receivable with cash at bank. It will be a reconciling item if we reconcile bank statement and balance sheet.

Deposit in Transit on Bank Reconciliation

When the company record deposit in transit, it means we record cash into cash at bank account while it does not reflect the actual bank statement. The balance on our balance sheet will differ from bank statement. If it happens at the end of the month, it will present as the reconciling items in bank reconciliation.

Accountant needs to list it as the reconciling items otherwise the balance between book and bank will not equal. They need to check in the next bank statement to see if the balance is credited into the account. If the balance does not show up means that there is something wrong with the deposit.

In next month’s bank reconciliation, accountant needs to follow up on all reconciliation items if they are showed up in the bank statement. Those items include the deposit in transit.