Definition of Float
In accounting and bookkeeping, float is the time between the writing of a check and the time that the check clears the bank account on which it is drawn.
Examples of Float
Payer Corporation writes a check for $5,000 and mails it to a supplier on Wednesday. However, the check will not clear Payer Corporation’s checking account until Monday. Hence, Payer Corporation will have $5,000 of float between Wednesday and Monday.
Mary plays the float when she mails her rent check on Thursday even though she does not have a sufficient balance in her personal checking account. She is counting on her paycheck being electronically deposited on Monday morning prior to her rent check clearing her checking account.
Float is associated with the outstanding checks shown on the bank reconciliation.
