Money Matters

What are deposits in transit and why are they included in a bank reconciliation?

Ever checked your bank and wondered why a deposit isn’t showing? It’s most likely a deposit in transit—a normal part of business that’s worth tracking in its own right.

Bank reconciliation is a standard process to help you determine how much money your business can work with at any moment. It’s necessary because your records don’t always match your bank statement. 

Today we’ll look at one of the more common reasons for such mismatches—deposits in transit. That is, funds you’ve recorded but the bank hasn’t processed yet. 

This article breaks down what deposits in transit are, how they work, and why they matter to your business. 

Here’s what we cover:

What are deposits in transit?

Deposits in transit are deposits you have recorded in your accounting system before they are cleared by the bank. This timing gap means your books and your bank balance don’t match—but only for a short time.  

You can bring these gaps to light by performing bank reconciliation. This is much more than just a quick check—it’s a key process that keeps your records accurate. Done regularly, reconciliation helps you avoid surprises when paying bills or making decisions.  

Tracking deposits in transit also makes it easier to spot delays or errors. That means more control over your cash and a clearer view of your financial position. 

Why does deposit in transit happen?

Like many business owners, you probably prefer to deposit checks at the end of the business day rather than making several trips. You record the deposit once it’s made, but the bank might not process it until the next business day.  

During that time, your money is “in transit”—you’ve handed it over, but it hasn’t cleared. If you check your bank account in real time, you won’t see it there yet.  

This timing gap is normal, and deposits made after hours or on weekends often post a day or two later. There’s a common belief that check deposits take three days to clear, but that’s mostly a myth.

In many cases, banks process deposits within one business day. However, longer delays can happen based on the payment method or your bank’s policies.  

Why are deposits in transit included in a bank reconciliation?

If you’re planning ahead or reporting to investors, you need accurate numbers. You can’t be sure of those numbers if your books and your bank balance don’t line up.  

Deposits in transit create a mismatch—your books say one thing, but your bank says another. It’s like two cities in different time zones: both are right from their perspective, just not aligned at the same moment.  

So, bank reconciliation cannot overlook deposits in transit when it brings everything back in sync. By including deposits in transit, you avoid reporting errors and keep your records reliable.

This ensures you’re not missing money or misreporting your financial position, which is essential for good decisions. 

Opposite of a deposit in transit

It’s natural that the bank has to respond to your input—it’s the dynamics of your business that cause most of the change in your records. So, most mismatches involve the bank catching up with your records.

But can the reverse happen? Yes—sometimes the bank registers incoming funds before you get to update your own records. 

This might occur if a client pays you directly by wire transfer or ACH, and you don’t know the payment was received until you check your bank.

It can also happen if your point-of-sale system deposits money automatically, but you haven’t yet logged the individual sales in your accounting software. 

This “alternative” temporary mismatch can lead to confusion if you’re reviewing accounts and see more cash in the bank account than you expected.

This is one more reason why regular bank reconciliations are so important, and both records come to reflect the same reality. 

What are the benefits of recording deposits in transit?

Financial accuracy is a guiding principle across many aspects of any business. But when it comes to recognizing deposits in transit, three areas stand out.  

Stronger cash flow planning 

Knowing what funds are on the way—even if they aren’t yet visible in your bank statement—lets you plan with confidence. You can time payments, manage spending, and avoid guessing at your balance. It’s a simple step that gives you more control over your cash flow

Compliance and reporting 

Monitoring deposits in transit help ensure your records reflect all incoming cash. That matters for taxes, audits, and accurate financial reports. You get a true picture of your financial position. 

Improved internal oversight 

Tracking deposits in transit encourages regular reviews of your banking and bookkeeping activity. This supports better internal controls, lowers the risk of missed deposits, and keeps your processes tight and reliable. 

What are the risks of deposits in transit?

Deposits in transit can create blind spots if they aren’t tracked properly—like driving without a rear-view mirror. When your books and your bank statement don’t match, you could make decisions based on incomplete information. At best, that leads to confusion. At worst, it can result in costly financial errors. There are two main areas of risk to keep in mind: 

Overdraft and cash shortfall risk

If you assume a deposit has cleared when it hasn’t, you might spend money that’s not actually available. Banks only recognize deposits once they process them, not when you record them. That gap can lead to overdraft fees, bounced payments, or strained vendor relationships—especially if you rely on your books to make spending decisions. 

Fraud and error exposure 

Without regular reconciliation, a deposit could be recorded but never actually made. Whether it’s an honest mistake or something more malicious, missing deposits can slip through the cracks. Delays in processing also add to the confusion. That’s why it’s important to reconcile often, flag any deposits that haven’t cleared after a few days, and maintain strong internal controls. 

How to find deposits in transit on your bank reconciliation

Modern accounting systems can flag reconciliation anomalies automatically. But if you’re working manually, spotting deposits in transit is still straightforward. 

Start by comparing your cash ledger with your bank statement. Simply look for deposits that appear in your records but not in the bank’s. These are your deposits in transit.  

The good news is you probably don’t need to scan the entire column. Focus on recent activity—deposits made near the end of the period or after bank hours are the most common culprits.  

Check your deposit slips and transaction logs to confirm the dates. For deposits still pending, you can physically mark the relevant slips or add comments to digital transaction logs.  

If pending deposits still don’t appear in the next period’s bank statement, follow up. Delays may signal a posting error on your side or an issue with the bank. 

How to determine and calculate deposits in transit

To calculate deposits in transit, start with the list of unmatched deposits you identified during reconciliation. Tally the amounts to get a total. 

Keep a running list so you know which items will be carried over to the next period. This prevents double-counting and keeps your records clean. 

Accounting software can handle this automatically, but it’s still good to understand the logic behind the numbers. 

How to make a journal entry for deposits in transit

You don’t usually make a separate journal entry for deposits in transit. Instead, you record the deposit when you receive the payment or make the bank deposit—whichever comes first, depending on your accounting method. 

For example, when you receive a customer payment by check, this will affect two accounts once deposited. It must be recorded as a debit or credit accordingly: 

Account Debit* Credit 
Bank $$ – 

*Incoming cash is technically a debit in the bank account ledger. This is because your bank account is considered an asset, much like any other investment in your business. 

Account Debit Credit* 
Accounts receivable – $$ 

*Technically a credit in AR, because it reduces what the customer owes. 

If the deposit is still in transit, it stays on your books but won’t match the bank yet. That difference is cleared up when you reconcile. Always date the entry accurately so it lines up with your deposit slip. 

Outstanding checks versus deposits in transit: What’s the difference? 

Just as deposits in transit cause delays in posting incoming funds, outstanding checks delay the outflow from your side. For example, you’ve written a check to a supplier, but they haven’t cashed it yet.

Until that happens, the money hasn’t left your bank account—even though it’s no longer truly available. 

Outstanding checks and deposits in transit are opposites. One is money coming in, the other is money going out. But both create timing mismatches between your books and your bank statement. 

Deposit in transit Outstanding check 
Money coming into your bank account  Money going out of your bank account 
Not yet recorded by your bank Not yet recorded by recipient’s bank 
Can make your balance look lower than it really is Can make your balance look higher than it really is 

During reconciliation, review both types to get an accurate picture of your cash position. Tracking them helps prevent errors and ensures your records reflect your true available balance. 

Examples of deposits in transit

How often have you gone online to check your bank account and wondered why a payment isn’t showing up? That’s the effect of a deposit in transit. Let’s reiterate why they happen with some examples: 

  • Check deposit made at closing time—processed the next business day. 
     
  • Cash dropped in a night deposit box—posted when staff handle it the next morning. 
     
  • Weekend credit card sales—often don’t reach your account until Tuesday or Wednesday. 

Good business management dictates that you should recognize these deposits immediately. It’s good practice to understand where your money is and when it will be available. But the bank won’t show the deposits until they’ve been processed. 

Best practices for managing deposits in transit 

Even though bank reconciliation helps catch timing issues, it’s better to reduce those gaps in the first place. Here are some tips that could help:  

  • Consistent logging: record deposits at the same time each day or after each transaction batch. 
  • Tagging payment sources: use labels to track where each deposit came from—like checks, POS, or ACH. Specialized software should offer a menu of tags you can choose from. 
  • Minimizing unrecorded deposits: avoid letting cash or checks sit; record and deposit them promptly. 
  • Assigning responsibilities: make it clear who is in charge of logging payments, who deposits them, and who verifies the process. 
  • Flagging large deposits: train your team—or accounting platform—to alert the managers when unexpected or high-value payments appear in the system. 
  • Correct filing of deposit slips and receipts: keep backup entries for every recorded deposit to simplify cross-checking later. 

Avoiding reconciliation headaches: Tools that make it easier

You’ve seen that manually tracking deposits in transit is straightforward—but it’s still time-consuming. You can free up that time by using bank reconciliation software

Bank reconciliation tools connect your books to your bank in real time. They automatically update your system with every transaction, flag timing differences, and highlight missing items.

Some systems even suggest how to match for partially posted or slightly mismatched entries. For example, they can identify whether a deposit is comprised of multiple transactions. 

Automated tools reduce errors and give better visibility into your cash flow. You’ll see what’s cleared and what’s pending at a glance. The result is fewer surprises and easier decision-making. 

Final thoughts

Timing gaps between your records and bank processes are a standard part of running a business. And deposits in transit are a natural consequence of that.  

Tracking these pending deposits helps you stay aware of your true cash position—whether you’re making daily spending choices or mapping out long-term plans.  

With regular reconciliation and the right tools, stray deposits become easy to manage. You’ll gain more control, reduce uncertainty, and make better strategic decisions. 

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Deposits in transit FAQs

1. Are deposits in transit considered errors? 

No, deposits in transit aren’t mistakes. They’re normal timing differences between when you record a deposit and when the bank processes it. They only become an issue if they’re not tracked or reconciled regularly, which can lead to confusion or missing funds. 

2. Are deposits in transit considered cash? 

Yes, from your accounting perspective, they count as cash. You’ve already received the money, so it’s recorded in your books. It just hasn’t cleared the bank yet. Until it does, it stays in transit. 

3. How long do deposits in transit take to clear? 

It depends on the type of deposit. Cash usually clears next business day. Checks can take two or more days, depending on when they’re deposited. Electronic and card payments often move faster, but weekends and bank holidays can cause delays even in the digital realm.