undeposited funds account

@ametz1201 

How many entries are we talking about?  If the entries are sitting in undeposited funds (UF), then you must have deposited them some other way otherwise your bank account would be short those funds.  So, how did you get those funds into your bank account?  Did you make additional deposits or ???  Every entry to UF also affected another account like A/R since this is double-entry accounting after all.  Therefore, you need to look at each UF entry and the other entry where the funds were deposited into your bank account to figure out how to clear the UF entries. 

For example, say you received payment on an invoice that went into UF, but not understanding why it wasn't showing in your bank account, you made a bank deposit in QB and assigned an income account to the deposit.  You now have an entry into UF as well as a duplicate entry to income (one from the invoice and one from the deposit).  To clear the UF entry, you would need to make an entry that reduces UF and also reduce your income since your income is overstated.  To do that, you have a few options: 1) you can make an expense transaction, use UF as the payment account and select your income account as the category or, 2) make a journal entry: debit your income account, credit UF. 

If you can provide more info, I can try and assist further.    

At the beginning I was categorizing the deposits when they came over to QuickBooks from my bank under PNC checking and just hit confirm.  Now I know how to match the deposits to the payments received after the deposits come over from the bank and the correct option is chosen to where its being deposited.  And I wasn't receiving the payments at the time so the person didn't change the drop down menu from undeposited funds to PNC checking.  There is A LOT.  

@ametz1201 

If the deposits were coded to UF, then how was the bank account being reconciled?  If the deposits were coded to UF, then your bank account must be short that amount unless someone created additional deposits that went into the bank account.  Is your bank account short the amount in UF?  If not, then you need to look at your UF register and see what the offsetting accounts are for all of the UF entries.      

I understand how important clearing out your undeposited funds without messing up your book, @ametz1201.

On top of that, I'd like to recognize your effort in searching for videos online on how to fix it. Let me add some info to help you zero out the undeposited funds without affecting your book.

To avoid affecting your account balances, we can use a clearing account to transfer the amounts. To create this account, utilize these steps:

1. From the Transactions tab, select Chart of accounts.
2. On the upper right corner, click the New icon.
3. In the Detail Type dropdown, choose Cash on hand.
4. Complete the account details.
5. Tap Save and Close.

Once done, we can move the amount from the Undeposited Funds account to the clearing account using journal entries or record transfers. Yet, I recommend reaching out to your accountant for additional guidance.

After that, we can inactive the clearing account so the system will zero out its balance. Here's how:

1. Go to Transactions.
2. Select Chart of accounts.
3. Look for the clearing account we created.
4. Click the dropdown arrow beside the View register. Then, choose Make inactive.
5. A prompt will show. Pick Yes, make inactive.

For future help, if you want to combine multiple transactions in a single record so QuickBooks matches your real-life bank deposits, you can read this article: Record and make bank deposits in QuickBooks Online.

If you have additional questions about managing your bank deposits and accounts, don't hesitate to come back here. I'll be willing to lend a hand. Have a good day.

@ametz1201 

@Bryan_M 's advice will not work and, in fact, will just create more work.  Using a Clearing Account does not apply to this situation. That would just be moving UF to a Clearing Account and kicking the can further down the road.  

Just wondering if you found any answers to how to clear the undeposited funds account in your QBO. I have the same issue with our quickbooks.  The funds have cleared the bank and all accounts are reconciled, but the P&L and balance sheet are not correct at all.  I saw there is about $10,000 in undeposited funds.  I have no idea what that is or why it is there, but I have feeling it has something to do with why the reports are not correct. Need help. I have watched a lot of videos, but nothing yet corrects the situation.

Hi Daynna,

I appreciate you for posting in the forum.

I'd appreciate it if you can add more details about your concerns. Did you recently migrate to QuickBooks Online? Also, are the transactions in question from the prior year?

Additionally, are the entries on the undeposited funds the ones that are already cleared on your bank?

I'll keep an eye on your response.

Hi Daynna,

I don't think so.  I know my balance sheet is off a lot because of the QB acct balance is off so much.  I would like to correct it.  I may have to call QB direct and see if I can get help on clearing this up.  I have a lot of money in undeposited funds and would like to fix it. And its been there for a long time. Same here, I watch so many videos about different things and seems like there are different ways to do something so it gets overwhelming.

Please let me know if you find anything out.

@Daynna @ametz1201 

"The funds have cleared the bank and all accounts are reconciled, but the P&L and balance sheet are not correct at all. I saw there is about $10,000 in undeposited funds. I have no idea what that is or why it is there, but I have feeling it has something to do with why the reports are not correct."

Undeposited Funds (UF) serve the same purpose as a bank account - a temporary one.  Its main purpose is to allow you to group payments into one, larger deposit.  Entries to undeposited funds hit your P&L and balance sheet (and all other reports) just like an entry that is deposited to your bank account.  So, if your bank account is reconciled and you have no outstanding payments to be deposited, then the entries in UF are duplicates and will need to be reversed or deleted depending on whether they are in the closed period or the current period.  Make sure they are duplicate entries first.  UF entries in 2023 can be deleted (assuming you don't close each month).  UF entries in previous years should be reversed in 2023.  Are these UF transactions payments received on invoices or deposits or ???  

For my situation, these are old transactions, deposits, from when you first started our business and the person who was receiving the payments didn't have the correct banking account picked when receiving the payment and just received the payment.  And when the deposit came over from my back into QBO I didn't know at the time to match the deposits to the payments when adding the transactions so when I categorized the depoist i just clicked categorize and picked my bank name from the drop down menu and clicked add.  So the money that was received into the undeposited funds just sat there and still is.  So now all payments received into my bank name from the drop down menu not undeposited funds.  So I have large negative QBO balance showing and large amount sitting in undeposited funds when looking at the chart of accounts. 

I am still learning QBO since I am finally able to work for the business full time.

They are payments received on invoice. 

They are payments received on invoices. 

Yes, I am new to QBO. I am working the 2023 transactions to prepare this companies books for the accountant for taxes. The books are a bit messy right now. I am slowly getting things figured out and learning QBO as I go. 
Yes, the undeposited funds already cleared the bank. 

Today I was able to learn a big reason why my QB balance was way off from my bank balance. There was a setting under the Rules that was causing the payroll to post a duplicate transaction under expenses. I was able to delete the duplicates and match and reconcile the original transactions. This was tedious (and I’m not quite finished yet). I also was able to delete the undeposited funds since they had already cleared the bank. I did both of these moves through a call from the help section on QBO with a shared screen from a technician. They were super helpful. I still have some more clean up to do, but it was encouraging to make some progress today. 

Any answers on your end?

@ametz1201 

"So the money that was received into the undeposited funds just sat there and still is. So now all payments received into my bank name from the drop down menu not undeposited funds. So I have large negative QBO balance showing and large amount sitting in undeposited funds when looking at the chart of accounts."

I'm confused by your comment about having a large negative balance.  What account has a negative balance?  Is it the same negative balance as the positive balance from the duplicate transactions in UF?  If so, this should be an easy fix.  If not, read on. 

Please re-read my very first post.  You need to look at the entries sitting in Undeposited Funds (UF) and confirm that they are all duplicates and, if they are, then they need to be reversed since it sounds like these transactions are pre-2023. 

The bigger issue here is that this is double-entry accounting and every entry hits two accounts.  So, if you received a payment and it's sitting in UF, then that same amount is sitting in another account and you need to reverse the entry to that account as well. 

Run a balance sheet report.  Under Other Current Assets, you will see Undeposited Funds.  Click on the amount listed to the right.  That will pull up a transaction report.  Click 'Switch to classic view'.  Make sure the dates of the report go back far enough to include the open transactions.  Find the open transactions.  Look under the SPLIT column.  That is the other account that is being affected.   

To reverse the transactions sitting in UF, you can create an expense transaction (New > Expense), choose Undeposited Funds from the Payment account drop-down and under Category and amount, choose the same category and amount as the duplicate transactions.  That will reverse the duplicate entries sitting in UF.         

My balance "in QB balance" (under my bank balance) on the home page is showing a negative balance.  Which is a large amount and I have a large amount sitting in UF which is not negative. The amount in UF is from earlier years.