Bookkeeping undeposited checks

When you accept a check for an invoice payment, but don’t deposit it until a later date, the payment should be recorded to a Money in Transit account. This ensures that the invoice is marked as paid on the correct date, and that your bank statement reconciles

A Money in Transit account tracks the funds that are expected to be deposited into or withdrawn from a Bank account at a future date, usually within a few days. Examples of this are credit card sales that have been processed but have not yet been deposited into your bank, or checks (written or received) that have not been deposited into or withdrawn from your bank account.

How to add a Money in Transit account:

  1. Go to Accounting > Chart of Accounts. Under the Assets tab, add a new account to the Money in Transit Subcategory. Give the account a name like Check Clearing, or simply Money in Transit.

How to Record Undeposited Checks to Money in Transit:

Let’s say a client pays you by check on March 31st, and you deposit the check on April 2nd. Although the invoice is marked as paid in March, by the time the check clears and posts to your bank account, it’s April.

  1. When you receive a check for an invoice payment, apply the payment directly to the invoice on the Invoices page. Select the Money in Transit account that you created as the payment account.
  2. When you deposit the check, and the deposit transaction imports from your bank, categorize the deposit as a Transfer from Bank, Credit Card, or Loan and select the Money in Transit account from the dropdown menu. This will leave you with three transactions: The original payment recorded to Money in Transit, the imported transaction from your bank, and a Wave-created transaction called Created Transfer to record the funds moving between accounts.

How to add a Money in Transit account:

  1. Go to Accounting > Chart of Accounts and click Add a New Account. In the Asset tab, select Bank & Cash and click Other Bank Account. Give the account a name like Check clearing, or simply Money in Transit and click Save.

How to Record Money in Transit:

Let’s say a client pays you by check on March 31st, and you deposit the check on April 2nd. Although the invoice is marked as paid in March, by the time the check clears and posts to your bank account, it’s April.

  1. When you receive the check, apply the payment directly to the invoice on the Invoices page, and select your Money in Transit account as the payment account.
  2. When the cleared deposit transaction imports from your bank, click Add Expense and create an expense transaction whose account is the Money in Transit account you created in the first step, and whose amount is equal to the deposited amount.
  3. Check the box to the left of the imported payment transaction as well as the expense transaction that you just created And click Transfer at the top of the page. This will show that the payment amount was transferred from your Money in Transit account to your bank account.
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