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Deposit of customer payment to income account and not Undeposited Funds.

A previous worker deposited customer payments to an income account so those payments have not gone towards the customers invoices.  The bank account has already been reconciled.

How do I correct the bank deposits so that the invoices are shown as paid?

I've already tried going to the actual deposit, clicking "edit transaction" but I can't change the "from account" to Accounts Receivable which I figured would create a credit that I could then go in and clear the invoices.

I use QuickBooks Pro 2016. 

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Best answer 12-10-2018

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Established Community Backer ***

The function of Undeposited Funds just means "On its way...

The function of Undeposited Funds just means "On its way to the bank."

You are really asking about the Income activity, not the UF activity.

If this is a Cash Basis entity, you have to report it as income when you got it. You don't want to carry negative AR.

So, here is what you do:

That other person should have created an Other Charge Type item linked to Income, for using on Sales Receipt and not using Deposit manually. Now you have a customer name with an item on customer transactions, that would have helped you track and report.

You can make that item Now.

Then, Use it on a credit memo for this customer, to apply it to their invoice. This reduces their total owed now, in consideration of those funds being received previously.

And this is the same as:

Income when we got it = negative income, the same as a discount, when we have the actual sale.


If your entity type is on Accrual Basis, that money should have been Liability when you got it and offset that Liability when you apply it; that means the Other Charge type item is linked to Liability, not to income. But now, any customer you should have been tracking as Liability, you did not track as such, so you Already called this income, and the application of their prepayment still is a reduction of your income.

Always use an item on a credit memo for this. Don't carry negative AR.

4 Comments
Established Community Backer ***

The function of Undeposited Funds just means "On its way...

The function of Undeposited Funds just means "On its way to the bank."

You are really asking about the Income activity, not the UF activity.

If this is a Cash Basis entity, you have to report it as income when you got it. You don't want to carry negative AR.

So, here is what you do:

That other person should have created an Other Charge Type item linked to Income, for using on Sales Receipt and not using Deposit manually. Now you have a customer name with an item on customer transactions, that would have helped you track and report.

You can make that item Now.

Then, Use it on a credit memo for this customer, to apply it to their invoice. This reduces their total owed now, in consideration of those funds being received previously.

And this is the same as:

Income when we got it = negative income, the same as a discount, when we have the actual sale.


If your entity type is on Accrual Basis, that money should have been Liability when you got it and offset that Liability when you apply it; that means the Other Charge type item is linked to Liability, not to income. But now, any customer you should have been tracking as Liability, you did not track as such, so you Already called this income, and the application of their prepayment still is a reduction of your income.

Always use an item on a credit memo for this. Don't carry negative AR.

Community Contributor *

Hi HelpMe, Thanks for reaching out to us! You're on the r...

Hi HelpMe,

Thanks for reaching out to us!

You're on the right track! In QuickBooks, creating a customer credit from an existing deposit and applying the credit to an open invoice is the only way to resolve this. However, if the period was closed when payment was originally deposited, you can no longer edit it. You'll need to reopen the books before making the necessary changes (and it may ask for a password).

We recommend consulting with your accountant if your not sure though, they will be your best resource on what works best for your books.

Let me know how it goes. Have a great day!

Community Contributor *

Re: The function of Undeposited Funds just means "On its way...

I have no need for Undeposited Funds. I receive very few payments, deposit them immediately, and do not batch deposits. I have more than one company file. In one (set up how I would like) when I choose Customers/Receive Payments, the Customer Payment window has a field that allows me to choose the bank account I want to deposit into. In the second company file, in that location, it just says "Where does this payment go?" which just takes me to some not very helpful, help info.

 

What setting(s) do I need to change so that the second company file behaves like the first?

Moderator

Re: The function of Undeposited Funds just means "On its way...

Hello there, @Bart707.

 

Thank you for posting in the Community. I'd be happy to help and walk you through on how to change the default account on the Customer Payment section. 

 

To do that, you need to deselect the Undeposited Funds as the default account on the Customer Payment page. That way, you have the drop-down for the DEPOSIT TO field, and you can make your selection from there. 

 

Here's how: 

  1. At the top menu, select Edit
  2. Select Preferences
  3. On the left pane, select Payments
  4. At the top, click the Company Preferences tab. 
  5. Remove the check on the Use Undeposited Funds as a default deposit to account box. 
  6. On the right pane, click OK
  7. Click OK on the pop-up message. 

I've attached a screenshot for your reference.

 

Capture.PNG

 

For additional reference, I'm adding these articles:

Also, if you need to reach out for more help, our phone agents will be able to help you get to a resolution quickly.

 

Here's how to reach them: 

  1. Go to https://help.quickbooks.intuit.com/en_US/contact.
  2. At the top right, select your QuickBooks version.
  3. Select a topic.
  4. Click on the Get Phone Number button.

These resources should help to get you back on track and set up the second company file just like you wanted when recording payments. 

 

Keep me posted if you have any other questions about changing the set up for depositing payments. I'll be happy to help you out. 

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