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Intuit

Understand how the Undeposited Funds account works

Undeposited Funds is an internal other current asset account created by QuickBooks Desktop to hold funds until you are ready to deposit them. It serves as the default Deposit To account when you receive payments, use a payment item on an invoice, or enter a sales receipt.

How the Undeposited Funds account works

If you use Undeposited Funds:

  • You can deposit payments by group to match actual deposits to your financial institution. It allows you to easily reconcile your statement with the QuickBooks bank account.
  • You will not see the Deposit To option in the Receive Payments or Enter Sales Receipts window. Any payment you receive from customers will automatically go to the Undeposited Funds account.
  • You still need to deposit payments that are in the Undeposited Account to your bank account using the Make/Record Deposits window.
  • When you are in the Make Deposit window, you cannot use the default Undeposited Funds account for the Deposit To or the From Account drop-down. QuickBooks will display Only QuickBooks can make deposits from Undeposited Funds. To use transactions from Undeposited Funds, you need to select Payments from the menu at the top.
  • Since a deposit may contain any number of payments, QuickBooks does not associate a customer name. As such, when you deposit payments from Undeposited Funds to a bank account, the bank account register will not show the payee name.
Note: If you're not using Accounts Receivable functions such as invoices and payments, or if you take individual payments to your financial institution (rather than a batch of payments), you can bypass the Undeposited Funds account by going directly to the Make/Record Deposits window.

If you don't use Undeposited Funds:

  • You need to select a Deposit To account when you Receive Payments or Enter Sales Receipts.
  • Each payment you deposit directly into an account appears on a separate line in the account register and is marked as a payment (PMT) and not as a deposit (DEP).
  • Your payments will be deposited directly to the bank account you selected.

Change the default account for depositing payments

  1. From Edit menu, select Preferences.
  2. Select Payments, then go to Company Preferences tab.
  3. Mark or unmark Use Undeposited Funds as a default deposit to account as appropriate.
  4. Select OK.

Remove already deposited items from Undeposited Funds

Income is recorded through an Invoice and a Deposit. If a Payment for an Invoice is in Undeposited Funds but a Deposit is recorded separately, income will be overstated. You can correct this by deleting the separate Deposit and moving the Payment from the Undeposited Funds. However, if the Deposit is in a previous accounting period and cannot be changed, you can remove the Payment from the Payments to Deposit window. To do so, you need to create a zero deposit using the overstated income account.

Important: Before removing payments from the Undeposited Funds account, make sure to consult your accountant and back up your company file.

  1. From Banking menu, select Make Deposits.
  2. In the Payments to Deposits window, select the payment/s that was deposited separately, then OK.
  3. In the Make Deposits window, on a blank line, select the overstated income account from the From Account column drop-down.
  4. Enter the negative amount in the Amount column. Make sure the Deposit subtotal is zero.
  5. Select Save & Close.

Show undeposited payments in Undeposited Funds

If you need to see which payments have not been cleared/deposited yet, you can customise the Undeposited Funds QuickReport.

  1. From Lists menu, select Chart of Accounts.
  2. Right-click the Undeposited Funds account, then select QuickReport: Undeposited Funds.
  3. From the Dates drop-down, choose All.
  4. Select Customise Report, then go to Filters tab.
  5. From the Filter list, select Cleared.
  6. Under Cleared, select No, then OK.