Review / reference
Deposit in transit: definition, examples, and how to handle it in a bank reconciliation
A deposit in transit is money you have deposited and recorded in your books that has not reached the bank statement by the statement date, usually because it was made after the bank’s daily cutoff, on a weekend, or at an ATM. In a bank reconciliation, add it to the bank statement balance. It should appear on the next statement within a few business days. If it does not, treat it as a problem to investigate, not a timing difference.
At a glance
One deposit followed across two statements
Fictional example · Juniper Design Studio, one deposit across two statements
| Date | What happened | In the books | On the bank statement |
|---|---|---|---|
| Fri Jul 31 | Customer checks deposited at the bank’s ATM after the daily cutoff | Deposit recorded, cash up 1,250.00 | Not shown |
| Jul 31 | July statement period ends | No change | Not shown: deposit in transit |
| Mon Aug 3 | Bank credits the deposit on the next business day | No change | Deposit 1,250.00 |
| Aug 31 | August statement period ends | No change | Shown on Aug 3: cleared |
| Bank side | Jul 31 | Aug 31 |
|---|---|---|
| Statement ending balance | 6,480.00 | 8,105.00 |
| Add deposit in transit (Jul 31 ATM deposit) | 1,250.00 | 0.00 |
| Adjusted bank balance | 7,730.00 | 8,105.00 |
| Book balance | 7,730.00 | 8,105.00 |
| Difference | 0.00 | 0.00 |
Step by step.
List deposits recorded but not on the statement
Compare every deposit in your books for the period with the credits on the bank statement. Any deposit recorded on or before the statement end date that the statement does not show is a candidate deposit in transit.
Confirm the deposit was actually made
Find the evidence for each candidate: the deposit receipt, the ATM or mobile deposit confirmation, or the payout notice from your card processor. A deposit with no evidence is not in transit. It may never have been made, or it may have been recorded in the wrong account.
Add the total to the bank side
Start with the bank statement ending balance and add deposits in transit, then subtract outstanding checks. Do not change your book balance: the deposit is already recorded.
Check the next statement
When the next statement arrives, confirm each deposit in transit appears in the first few days and for the same amount. Take it off the list once it clears. If it has not appeared, start investigating right away.
What a deposit in transit is
A deposit in transit is a timing difference between your books and the bank. You recorded the deposit on the day you made it. The bank credited it on a later day, after the statement period closed. On the statement date your book balance is higher than the bank balance by the amount of the deposit.
IRS Publication 583 names this as one of the reasons the statement balance may not agree with your books: the statement does not include deposits made after the statement date. Its fictional example adds two deposits that appear in the checkbook but not on the statement to the bank statement balance before subtracting outstanding checks.
Common examples
Most deposits in transit come from the last day or two of the period. These are the usual causes.
- After the cutoff: a bank can treat a deposit made after its daily cutoff hour as received on the next banking day. The Federal Reserve’s funds availability examples include a deposit made at 3:00 p.m. at a bank with a 2:00 p.m. cutoff, which is considered received the following day.
- Weekends and holidays: in the Federal Reserve’s examples, a Saturday deposit at a bank open on Saturday is treated as received on Monday, because Saturday is not a banking day. A deposit made on a Saturday at the very end of a month can therefore count as received in the next month.
- ATM and mobile deposits: one made late on the last day of the month may not be processed until the next banking day. Do not confuse this with availability: the Consumer Financial Protection Bureau notes that if you deposit a check at your own bank’s ATM, it could take up to 2 business days before you can withdraw the funds.
- Card processor payouts: if you record card sales as cash when the sale happens, the money only reaches your bank when the processor pays it out. Stripe’s documentation, for example, lists a settlement timing of 2 business days for US accounts, with longer timing for bank debits such as ACH, and says payouts scheduled on a weekend or holiday arrive on the next business day.
- Night drop and branch deposits recorded on the last day of the month, but processed by the bank the next morning.
How to treat a deposit in transit in a bank reconciliation
Add deposits in transit to the bank statement balance. The bank side then reads: statement ending balance, plus deposits in transit, minus outstanding checks, equals the adjusted bank balance. The book side starts from your ledger balance and adjusts only for items the bank recorded and you did not, such as fees and interest.
There is no journal entry for a deposit in transit. The deposit is in your books already. When it clears next month, you simply mark it as cleared.
Card processor deposits need one extra check. Many businesses record card sales into a clearing account and only record the bank deposit when the payout arrives. In that setup, a payout sent after month end is not a deposit in transit, because it was never recorded as cash. It is a balance in the clearing account. Only call it a deposit in transit if your books show it in the bank account on or before the statement date.
How long is normal
A deposit in transit should show on the next statement within the first few business days. The Federal Reserve’s examples show why: a deposit made after the cutoff hour is treated as received on the next banking day, and a Saturday deposit on the following Monday. Card processor payouts follow the processor’s own schedule, so read your processor’s payout settings to know what to expect.
Funds availability and posting are different things. A bank may credit a deposit to your account and still place a hold on the funds. For reconciliation, what matters is the date the deposit appears on the statement, not the date you can withdraw it.
If a deposit never clears
A deposit that is still missing a week into the next period is no longer a normal timing difference. Work through these checks in order:
- Find the receipt or confirmation and compare the amount, date and account number with what you recorded.
- Search the next statement for the amount, and for a nearby amount in case of a keying error.
- Check whether it was deposited to a different account at the same bank, such as savings instead of checking.
- For a mobile deposit, check the banking app for a rejected or failed status. For a card payout, check the processor’s dashboard for a failed payout.
- If the check was returned unpaid, record the return: reverse the deposit in your books and follow up with the customer.
- If you still cannot find it, contact the bank with the deposit receipt. Keep the item on your reconciliation, labeled as under investigation, until it is resolved.
Deposit in transit versus pending deposit
Deposit in transit is a reconciliation term: a deposit in your books that is missing from the statement as of the statement date. A pending deposit is what online banking shows while the bank is still processing it. A deposit that is pending on the statement date will be a deposit in transit in that month’s reconciliation, because it is not on the statement yet.
Pending can also describe a deposit the bank has posted but placed a hold on. That deposit is on the statement, so it is not in transit, even though the funds are not available yet.
Sources and documentation
- IRS Publication 583: reconciling the checking account(opens in a new tab)
- Federal Reserve: applying funds availability rules(opens in a new tab)
- CFPB: when ATM check deposits become available(opens in a new tab)
- Stripe: payout schedules and settlement timing(opens in a new tab)
Follow the source links for original definitions and current product requirements.
Questions about this guide
Do you add or subtract a deposit in transit?
Add it to the bank statement balance. Your books already include the deposit, and the bank will record it after the statement date, so the bank side is increased to match.
Is a deposit in transit an asset?
Yes, in the sense that it is part of your cash balance. It is already included in the cash account in your books. It is not a separate account, so there is nothing extra to record.
Does a deposit in transit need a journal entry?
No. Only items on the book side of the reconciliation, such as bank fees, interest and errors in your books, need journal entries.
What is the difference between a deposit in transit and an outstanding check?
Both are timing differences on the bank side. A deposit in transit is money in that the bank has not recorded yet, so you add it. An outstanding check is money out that the bank has not paid yet, so you subtract it.
Can a deposit in transit be months old?
It should not be. A genuine deposit in transit clears within days. One that is weeks or months old usually means the deposit was never made, went to another account, was returned, or was recorded twice in your books. Investigate it and correct the books if needed.