My accountant tells me the undeposited funds account needs to have a zero balance at the end of each month. My question is why?

Hi there, 

Thanks for posting your question in the Community. 

It's important that your transactions and accounts match up with what your accountant suggests. Not only will this make the bookkeeping easier but it also encourages transparency between you and your accountant. That being said, I recommend following your accountant's advice. If you'd like to learn more about the Undeposited Funds account, there's a great article which you can reference. Here's the link to it. 

Let me know if you have questions. I'll be happy to help. 

I'm with you and I disagree with your accountant on this one.  This is the reason there is an undeposited funds account, to hold funds that have been received but not yet deposited to the bank.  In effect, it is another 'bank account' on your balance sheet.  Whether the money is sitting in the undeposited funds account or the real bank account should not matter to anyone.  At least it is showing up somewhere.  Without an undeposited funds account, you wouldn't even track a payment that was received but not taken to the bank yet.  No one would even know you were in possession of those payments without the undeposited funds account.

And no, you should not be changing dates on deposit transactions.  The date on your deposits in QB should match the date the deposit actually went to the bank.  You want to make sure that the register balance on your printed bank reconciliation report actually matches the register balance in QB on that date.  When you start messing with dates of past transactions, you risk having a mess in your reporting.

My situation is that the undeposited fund shows up at year end balance sheet. However the date made multiple deposits was passed the year end date. I use QBO accountant version. I am not sure how or shall I need to clear up the balance on this account. Could you please give me your advice?

I have undeposited funds, but no funds to deposit.  So I am with you...

Hello @Zhaoja1 ,

If you read a post or two above, I explain that it is OK to have funds in your undeposited funds at year end.  It simply is a "holding" account for funds that have been received (in your possession) but not yet deposited to the bank.

Now if you have an amount in your undeposited funds at year end but you don't have any payments to deposit, then that is a problem that requires investigation.

The undeposited funds account is basically a clearing account whose balance rises and falls throughout a normal accounting period, usually resolving to $0.00.  However, at month-end or at year-end, it is not unusual to have an amount in there as everyone is not going to rush to the bank just to get their deposits in by month end or year end.

Ok. I get it and I will try to tell my client to make deposit at end of each month and make sure all deposits sit in undeposited fund account will be process before the year end at 2021.

I will add this work flow into my practice and advise my client to do so.

Thanks,