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Frequent Explorer **

How to clear up undeposited funds account?

Customer returned paid for goods and rec'd credit memo.  Then decided he wanted a refund and I wrote him a check from the credit memo.  Now credit memo is showing in undeposited funds account.  This was several months ago and is now in a closed period.  How do I fix this?

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Best answer 11-28-2018

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Established Community Backer ***

Re: How to clear up undeposited funds account?

"Now credit memo is showing in undeposited funds account."

 

This happens when you put an Item on the credit memo that is linked to Bank or UF. That item is supposed to be linked, most times at least, to Income. It is the Reversal of a sale, so that makes it Negative Income. Then, issuing the check from the top of the credit memo clears the AR balance credit available, created by the credit memo.

 

Since this is a Closed Period, you would fix it like this: Select it for deposit, and on the next blank line, using a Negative value, post to some misc Expense account.

 

What you did is bypass the "sales function" for that "Sales Reversal" activity. Example:

Make an Other Charge type item linked to one income account for Refund/Write Off, to use on a Credit Memo when you do not want to list the original Sold charge item, such as Inventory that never arrived, arrived broken, was never delivered at all, etc. Or, for Services sold, you list the original Service for the Credit memo = the reversal.

 

Invoices using an item linked to Banking look in banking like a check. Credit Memos using an item linked to banking look like Deposits. Both of these just bypassed the Sales functions.

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7 Comments
Established Community Backer ***

Re: 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).

 

 

 

Established Community Backer ***

Re: How to clear up undeposited funds account?

"Now credit memo is showing in undeposited funds account."

 

This happens when you put an Item on the credit memo that is linked to Bank or UF. That item is supposed to be linked, most times at least, to Income. It is the Reversal of a sale, so that makes it Negative Income. Then, issuing the check from the top of the credit memo clears the AR balance credit available, created by the credit memo.

 

Since this is a Closed Period, you would fix it like this: Select it for deposit, and on the next blank line, using a Negative value, post to some misc Expense account.

 

What you did is bypass the "sales function" for that "Sales Reversal" activity. Example:

Make an Other Charge type item linked to one income account for Refund/Write Off, to use on a Credit Memo when you do not want to list the original Sold charge item, such as Inventory that never arrived, arrived broken, was never delivered at all, etc. Or, for Services sold, you list the original Service for the Credit memo = the reversal.

 

Invoices using an item linked to Banking look in banking like a check. Credit Memos using an item linked to banking look like Deposits. Both of these just bypassed the Sales functions.

View solution in original post

Frequent Explorer **

Re: How to clear up undeposited funds account?

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

Community Contributor *

Re: How to clear up undeposited funds account?

 
Moderator

Re: How to clear up undeposited funds account?

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: 

 

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.

 

Community Contributor *

Re: How to clear up 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.

QuickBooks Team

Re: How to clear up undeposited funds account?

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.

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