How to clear up undeposited funds account?

Did you ever actually complete the first transaction an Deposit the original payment?  If you go look at the open item in Undeposited Funds, is the date the original purchase date or the date you issued the Credit Memo?

I can't think of a way a Credit Memo would not change the Undeposited Funds account, but outstanding collected cash certainly would.  The CM should show up on the Customer's Acct with a balance available (negative).  When you opened the CM and paid it, it would close the CM and $0 the Customer's Acct (assuming no other invoices or other items).

That was indeed the problem.  Thank you so much!  You're terrific!

Are you having the same problem with the users in this thread, Lucy?

If so, you might want to see the details of qbteachmt's reply. This is a recommended answer to fix that certain issue.

Otherwise, I'll give you an overview on how Undeposited Funds works in QuickBooks Desktop. It is a default account that holds the money before you deposit it your bank. For more explanation about this, you can refer to these articles: 

• Understand How the Undeposited Funds Account Works
• What’s the Undeposited Funds account?

To clear out the Undeposited Funds account, you'll need to create a bank deposit. Here's how to do it:

1. Click Banking at the top menu and select Make Deposits.
2. In the Payments to Deposit window, mark the one that you need to remove from the Undeposited Funds.
3. Click OK and go to the Make Deposits window.
4. In the Make Deposits window, go to the Deposit To field and choose a bank account.
5. Click Save & Close.

If you choose to deposit the payment directly to your bank, we'll need to turn off the default Deposit to account function.

1. Click Edit at the top menu and select Preferences.
2. In the Preferences window, select Payments on the left menu.
3. Go to the Company Preferences tab and go to the RECEIVE PAYMENTS section.
4. Remove the check mark in the Use Undeposited Funds as a default deposit to account box..
5. Click OK.

After that, you can go back to the payments and change the account in the Deposit to field.

Here's also an article about a tool that helps you link deposits and payments: Clear Up Undeposited Funds Account.

Let me know if you have more questions in clearing the Undeposited Funds account.

Thank you so much for your help. I have another question, please help me out. 

I do wholesales to one of my store so that the sales should be "non-taxable". How can I create a Non-taxable for that income? Thank you again.

Hello there, @LUCYTRAN.

You can set up a non-taxable status for your customers and items. I can guide you on how to do it.

To set up the non-taxable status of an item, here's how:

1. Go to the Lists menu.
2. Select Item List.
3. On the Item List window, click the Item drop-down.
4. Choose New.
5. Enter the item details.
6. Assign Non Taxable Sales (or Non Taxable Labor).
7. Click Ok. 

To set up non-taxable customers, here's how:

1. Click the Customers menu.
2. Choose Customer Center.
3. Go to New Customer & Job.
4. Select New Customer.
5. On the Edit customer screen, go to the Sales Tax Settings tab.
6. From the Tax Code drop-down, choose Non-Taxable Sales (or Service). 
7. Click Ok. 

Once you have set the taxability status of your customer and list, ensure to choose Non-Taxable when creating an invoice and sales receipt. By doing so, you can ensure that your income will be tracked and calculated as Non-Taxable. You can refer to this article for more detailed instructions: Set up sales tax in QuickBooks Desktop.

Feel free to visit us here in the Community if you have other questions. I'm always here to help.