Cash in transit

What it means

Cash in transit is money that has left one place but not yet been credited at another. Typical examples are cash taken from the till and paid into the bank, which appears on the account only the next day, or card takings that the bank credits with a delay.

In the books this is tracked on account 261 Cash in transit in account class 2. It is a clearing account: when cash is paid in, the till is reduced and account 261 increased, and once the amount appears on the bank statement, account 261 is cleared.

A properly kept account 261 has a balance only when money really is still on its way. Every amount on it should match an exact movement on the other side, and at the close the balance should be explained by specific items.

How it works in practice

For retail clients we use account 261 for card takings and payment gateway receipts. Daily takings are posted from the till system, and the cash in transit is cleared once the bank or provider credits the money; the difference shows the fees the provider deducted.

We also route ATM withdrawals and bank deposits through 261. That way the cash book and the bank can be reconciled at any time and no amount is recorded twice.

At the stock-take on the reporting date we break down the 261 balance by day and source. Items that reached the bank only in January are fine; old unexplained balances, on the other hand, point to an error that needs tracing.

What to watch out for

The most common mistake is a long-standing balance on 261 carried forward year after year. It may hide a missing deposit, an unposted fee or even lost cash. In an audit or inspection it is the first place people look for discrepancies.

Cash in transit must not be used to absorb differences between till and bank that nobody can explain. If a difference cannot be traced, it must be booked as a shortage or surplus, not parked on a clearing account.