Undeposited Funds Account in Quickbooks: What is it and How is it Used?

Again, make sure you are selecting Undeposited Funds from the “Deposit To” drop-down menu, and save the transaction. Our partners cannot pay us to guarantee favorable reviews of their products or services. It’s good to periodically check your Undeposited Funds account and clear out any payments waiting to be moved. Here’s how to put payments into your Undeposited Funds account before you combine them. Using this Undeposited funds feature is going to be an important part of your workflow if you use an external processing service or have some wait time depositing your money.

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1. Again, make sure you are selecting Undeposited Funds from the “Deposit To” drop-down menu, and save the transaction.
2. If you run into trouble along the way, don’t hesitate to reach out to us.
3. Learn how to use the Undeposited Funds account in QuickBooks Online.
4. Most QuickBooks Online users find it easier to always post to the Undeposited Funds account first, and then enter the deposit into QuickBooks Online separately.
5. Since both transactions were dated on Jan. 29, the first thing to check for is a deposit in your Bank Register for $2,062.52 dated on or around Jan. 29.

You don’t need to do this if you’re downloading transactions directly from your bank. Looking for intuitive and simple workflows to satisfy your accounting needs? FreshBooks is made with small business owners and freelancers in mind. The “normal” balance for the Undeposited Funds account is $0. If you see a balance in Undeposited Funds on your balance sheet, you need to investigate. Here's what you need to know about QuickBooks Online's Undeposited Funds account to keep your business accounting operations running smoothly.

Continue entering payments received from your customers until all payments have been entered. In order for your financial statements to be accurate for the year, you need to record the payment as being received on Dec. 31. However, the payment will not clear your bank until Jan. 2 of the next year, at the earliest. QuickBooks Online has a special account specifically for these funds in transit. Unfortunately, the Undeposited Funds account in QuickBooks Online is one of the most misunderstood accounts — and one of the accounts most likely to cause a business’s financial statements to be incorrect.

Next Steps: Review your Undeposited Funds account

No more adding things up and hoping you get the right amount. Undeposited funds are like a big bag of money or cash drawer that you would keep your checks and cash payments in until you deposit them at the bank. You have already received the money, but it hasn’t been deposited in your account yet. You’re holding it until you make your weekly bank trip.

Imagine this account as the blue bank deposit bag businesses use to hold cash/checks/etc before they deposit them at the bank. For example, let’s say you deposit five US $100 checks from different customers into your real-life checking account. Your bank records all five checks as one US $500 deposit. So, you need to combine your five separate US $100 records in QuickBooks to match what your bank shows as one US $500 deposit. The special account enables you to combine multiple transactions into one record in the same way your bank has combined all the transactions into one histories of economic life record. Select all the payments you will include in the deposit, making sure the amount you record in QuickBooks Online matches the amount on your bank deposit slip.

Sales receipts for payments you process outside of QuickBooks:

This is most common when you batch your deposits — only going to the bank once or twice a week — or when you accept a credit card payment and it takes a day or two for the funds to clear your bank account. It requires you to do an additional step in the form of multiple entries for each deposit (one to the undeposited funds account and the other to the right account). It is, however, useful for businesses that frequently get paid by check or cash and physically deposit the money to the bank instead of using mobile check deposits.

This post will help you understand the purpose of an undeposited funds account, how to clear it, and how to avoid having payments automatically posted to this account. If you find that the deposit was posted straight to Income in the bank feed, un-reconcile the transaction, undo the entry and then match the transaction properly. Head over to the plus sign icon + and select Receive Payment. Choose your customer from the drop-down menu and their open invoice will automatically show up on the list.

How to Use Undeposited Funds in QuickBooks Online

Once you have determined all deposits have been recorded properly, open the Bank Deposit screen again and review what is in the Undeposited Funds account. For example, let’s say Willie’s Widgets paid you $300, Wally’s Whatsits paid you $750 and Whitley’s Whosits paid you $200. You batch these payments into one deposit totaling $1,250. However, you need to properly credit each customer for their payment. Posting each payment to the Undeposited Funds account and then recording the deposit in QuickBooks Online allows you to do this. Although you can record it as “deposited”, you’ll create a better representation of your records and accounts  by getting into the habit of using the undeposited funds account found in QuickBooks.

If you run into trouble along the way, don’t hesitate to reach out to us. We provide a vast range of QuickBooks services to suit all your needs. The undeposited funds account is meant to be a temporary account.