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What is a deposit in transit and why is it included in a bank reconciliation?

A deposit in transit is when the company sends a check or cash to the bank, but as of the end of the month, the bank has not yet processed the receipt of the funds. Therefore, the company’s monthly bank statement excluded the funds, even though they have already recorded the receipt of the funds in their accounting records. The company should add deposits in transit to the balance per bank statement.

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