Undeposited Funds is an account unique to QB, not part of normal accounting taught in college. In accounting, we are taught that accounting records business activity AFTER it occurs, so you would not record customer payment until after you actually make bank deposit. Bad practice in my personal opinion That being said, I believe QB forces you to use this two step process for all bank deposits which I dislike.
Undeposited Funds should usually be zero balance or equal to actual checks you have on hand and have not yet deposited into bank account. Every entry should go in and out of this account, leaving only those above. There are several ways to reconcile this account. For starters, need to find the point in time when account balance was last at zero since you should only need to reconcile from that point forward.
Then run report from that date to now and save in Excel. Then sort by the amount column and put the debits in one column and credits in a column next to that, then sort both by amount by date to line up. You should now be able to easily match up the ins and outs to see which entry is missing the 2nd entry. Whichever items those are, are the ones to research to see what happened and make corrections.
