When adjusting the bank's cash balance, what do deposits in transit do?

Deposits in transit represent cash that has been received and recorded in the company's books but has not yet been reflected in the bank's records. This can occur due to timing differences, such as when a deposit is made at the end of the business day but does not get processed by the bank until the following day.

When reconciling the bank's cash balance with the company's cash balance, these deposits need to be added to the bank's lower balance to properly reflect the total cash available. By doing so, the adjustment brings both balances into alignment, ensuring that all cash transactions are accounted for correctly. This is essential for accurate financial reporting and maintaining proper cash management control.