How do you record deposit in transit on bank reconciliation?

How do you record deposit in transit on bank reconciliation?

• A. Add deposit amount to bank balance
• B. Subtract deposit amount from bank balance
• C. Subtract deposit amount from book balance
• D. Add deposit amount to book balance

Answer: (A)

Deposits in transit are cash receipts the company has recorded, but the bank has not yet processed. Because the bank’s reported balance doesn’t include these deposits, you adjust the bank side upward to reflect what will be there once the bank catches up. That’s why you add the deposit in transit to the bank balance on the reconciliation. The book balance already includes the deposit, so you don’t need to adjust it for this item. Subtracting from the bank balance or altering the book balance would misstate the reconciliation.

Deposits in transit are cash receipts the company has recorded, but the bank has not yet processed. Because the bank’s reported balance doesn’t include these deposits, you adjust the bank side upward to reflect what will be there once the bank catches up. That’s why you add the deposit in transit to the bank balance on the reconciliation. The book balance already includes the deposit, so you don’t need to adjust it for this item. Subtracting from the bank balance or altering the book balance would misstate the reconciliation.