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suppose there was a deposit-in-transit on the year-end bank reconciliation that was not received by the...

suppose there was a deposit-in-transit on the year-end bank reconciliation that was not received by the bank by the cutoff date. Discuss the possible causes of this, and discuss the nature of the potential misstatements that could result

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Answer #1

Possible causes of why the deposit-in-transit was not received by the bank by the cutoff date are that the money was received by the company very late on the year-end closing date and by the time cash was deposited in the bank it was late and the working hours of the bank were over.

In such cases money deposited will reflect in next bank statement.

A misstatement that could result will be Ban balance will be understated by the amount of cash which is in transit.

Bank balance will be less than the cash balance reflecting in the company's ledger accounts.

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