01 May 2023
Debit funds in transit credit the payer. Cash-in-transit (CIT) or cash/valuables-in-transit (CVIT) is the physical transfer of banknotes, coins and items of value from one location to another. The locations include cash centers and bank branches, ATM points, large retailers and other premises holding large amounts of cash, such as ticket vending machines and parking meters.
04 May 2023
Funds in Transit refers to the amount of money that has been sent but has not yet been received by the recipient as of a specific date. This situation typically arises when a payment is made at the end of a financial period but does not clear until after that period has ended.
To make a journal entry in the books of the receiver when the amount is not received on 31st March 2023, you would first need to determine the amount of the funds in transit. Let's say the amount of the funds in transit is 1,000.
The journal entry to record this transaction would be as follows:
Debit: Funds in Transit 1,000 Credit: Accounts Receivable 1,000
The debit to the Funds in Transit account reflects the amount of the payment that has been sent but not yet received, while the credit to the Accounts Receivable account reflects the fact that the receiver is still owed this amount of money.
When the payment is eventually received, you would make the following journal entry:
Debit: Cash 1,000 Credit: Funds in Transit 1,000
This entry would reduce the balance of the Funds in Transit account to zero and record the receipt of the payment in the Cash account.
In the payer's books, the journal entry for the funds in transit would depend on the specific circumstances of the transaction. Here is an example of a journal entry that the payer could make:
Debit: Accounts Payable (a liability account) Credit: Cash or Bank Account (an asset account)
This entry would record the amount of money that has been sent as a reduction in the liability owed to the receiver in the form of accounts payable, and would also reduce the amount of cash or bank account balance.
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