[Mikey89]

Can someone please explain what kiting is to me. What is the disbursement date and received date. I don’t understand why a bank would disburse and receive a check. I thought they can only GET and check and GIVE an check? It seems like they are getting and giving the same check. This is very confusing. Any clarification would be GREATLY appreciated.

Reg 4/18/12 78
Far 7/30/12 74, 74, 75
Bec 11/11/12 74, 78
Aud TBD 51, 71, XX

[jeremyrichman]

I was going to type out my own original example to explain this, but I think the replies in the following thread do it better than I would have.

https://www.another71.com/cpa-exam-forum/topic/kiting-can-someone-explain-it-to-me

FAR: 8/29/12 88
AUD: 10/1/12 79
BEC: 10/23/12 90
REG: 11/21/12

[Mikey89]

Thanks J. I get the whole concept, but the wording is what is throwing me off. What exactly is cash disbursements and reciepts. Why would one bank have both of them? I thought one bank is disbursing the cash and the other one is recieving… But in my Wiley books all of the checks have a disbursement and reciept date.

Reg 4/18/12 78
Far 7/30/12 74, 74, 75
Bec 11/11/12 74, 78
Aud TBD 51, 71, XX

[momto5]

I'm not sure if this will help, but this is how I look at it. Say you have Bank A and Bank B. You have a balance in your account at Bank A of $1000 and a balance in Bank B of $200. You write a check(disbursement) from Bank A for $900 and deposit it in Bank B (receipt). Until the check makes it back to Bank A to actually get disbursed, it will look like you have a total of $2100 instead of $1200. Bank A will still show a balance of $1000 and Bank B will show a balance of $1100.

If your receipt is posted to your books on December 31st, but you wait to post the disbursement until January 2nd (when Bank A finally receives it and posts it to your account), it will appear that you have more money than you really do at year end.

FAR - 92 (4/27/12)
AUD - 96 (7/17/12)
BEC - 92 (8/30/12)
REG - 91 (11/12/12)

[jeremyrichman]

Here's another example:

-You have two accounts, A and B.

-A has a deposit in transit (check #1) because it hasn't been posted yet.

-B has a deposit (also check #1) because it already cleared.

So you're just double counting money. The check from A wasn't subtracted from the account yet, and the check from B has already cleared, so you're saying the money is in both places and doubling it. The reason it can work is that it's usually done at the end of a period so the bank dealing with account A wouldn't have had the withdrawal posted yet.

So using the above example, check #1 was written from account A on 12/31 and deposited in account B on 12/31. The bank for account A wouldn't be able to post the withdrawal on 12/31 so at the end of the period it appears the money is still there. The bank for account A would post the deposit right away because it's just a deposit. In the end it all evens out because in the next period the amounts would be correct since the bank for account A would eventually post the withdrawal. It's just a way to artificially inflate your cash balance at the end of the period.

Hope this helps!

FAR: 8/29/12 88
AUD: 10/1/12 79
BEC: 10/23/12 90
REG: 11/21/12

[Author]

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