Undeposited funds showing when undeposited funds account was never used.

Undeposited Funds Acct is the standard/initial setup for QBDT.  So unless someone specifically went in and changed where Client Payments went, QBDT is going to put them in Undeposited Funds. 

A little background...   The reason the UDF Acct is there is for manual payment of an invoice or for some sort of electronic payment that wasn't a Direct Deposit.  So let's say I pay my invoice by check tonight at 5pm as you were closing.  You would/should post the payment to my account in QBs on 01/15...  But since it's 5pm you cannot go to the bank.  So technically you have not deposited the money and it needs to go someplace.  That's why QBs defaults to putting it in Undeposited Funds.

Monday when you actually make the deposit, you would go to Banking; Make Deposit and my payment would be there and you can show the bank deposit transaction.  You might also have 3 other payments that you want to make in one deposit.  So you'd just check them off and show the one deposit. 

Now you may not take checks.  But even if you take credit cards, you may want to show the daily deposit that is going to match your CC Deposit.  I'm guessing if you had 10 people pay off their invoice by CC, your provider did not make 10 deposits to your account.  They made one deposit that day, or possible one deposit every few days pending your arrangement with them (or they may skip the weekends).  So you can make Deposits to the bank the day the money is really deposited.  Then with Bank Feed or when you reconcile, there is much less confusion in matching deposits.

So in your case, if you go to the Undeposited Funds Acct. or to Banking; Make Deposit, are there entries?  That means that QBs entered them the default way and someone manually duplicated a Deposit in the Bank Acct.  I'm guessing your revenue might be off too.   You've got the payment that went into UDFs and then you've got the rogue Bank Deposit.

How to clean it up depends upon how many there are.  But that's where you need to look to see what's going on.  It may also affect multiple year taxes, so you should bring your CPA or whomever does your taxes into the conversation.  

If there are only a few entries and it's not going to impact taxes or anything else, here's one quick fix:

• BACKUP
• Note the Bank Account Balance
• Print a report or make notes on the messed up deposits
• Delete a deposit manually entered into the Bank Acct and then make the correct Deposit from Undeposited Funds  (Banking Menu; Make Deposit)
• Repeat until UDF has nothing left
• Take your last Reconciled Bank statement and Reconcile with the SAME Closing Date and Closing Bank Balance
• Only the new entries you just made should show up as Un-Reconciled.  Check them off and you should show $0 and be reconciled again.
  • NOTE: If there were any transactions that had not cleared the first time you reconciled should still be left unchecked.  You're only re-reconciling the changes, which should be an equal match.
• Confirm your Bank Account Balance has not changed.

And again, I suggest you check with your Tax Accountant if this spans more than 2020 and 2021 since the 2020 taxes have not been filed.

Thank you, Pete_Mc for your patient and detailed information.  

Something I should have included in the original post:  There was no invoicing done by either company.  There are no customers.  Most deposits were for commissions earned.  

I took your advice and went to Banking - Make Deposits for each company; no deposits are listed. In that screen:  when I click on "payments" I get "you have no payments to deposit."  Since there are no deposits listed, I can't use the "history" or "journal" buttons.  

Sincere thanks again.  

Thank you for the additional details about how the deposits were recorded, GG69.

As mentioned by our Community Champion, QuickBooks automatically holds the funds in the Undeposited Funds (UF) account when receiving payments. To clear the amount in this account, you’ll need to make deposits.

To start, make sure the amounts are posted in the UF account to see them on the Deposit screen. 

1. Locate and open the transactions.
2. Verify if the payment is in the UF account. If not, change the account.

Once done, let’s deposit the payments. Here’s how:

1. Go to the Banking menu.
2. Select Make Deposits.
3. Select the payment in the Payments to Deposit window.
4. Select the bank where you want to deposit the funds. 
5. Click Save and Close.

Other than that, it's good to periodically review your UF account to see the transactions that need to be cleared. Here's how:

1. From the Lists menu, select Chart of Accounts.
2. Right-click Undeposited Funds and then select QuickReport: Undeposited Funds.
3. From the Dates drop-down menu, select All.
4. Select Customize Report.
5. Select the Filters tab.
6. Scroll down the Filter list and select Cleared.
7. In the Cleared section, select No and then select OK.

Additionally, I'm adding this guide to help you ensure your QuickBooks account matches the real-life bank statement:  Reconcile Workflow.

Keep us updated if you have other QuickBooks related questions. We'll help you out.

So I re-read your original post and see that you're saying the Undeposited Funds show up in the Client Data Review.  So that would mean you're using the Accountant version of QBs.

In that report when you click on the Undeposited Funds entry, it does not show you the transaction(s) that are giving you that amount?

Or, if you go to Chart of Accounts and open Undeposited Funds Account (as @CharleneMaeF mentioned), are there ANY entries in there?  Remember the Acct may be marked Inactive and hidden even if it has a balance.

The balance of the Undeposited Funds Acct should be $0.  If there is any other other amount, go through the transactions and see which ones QBs thinks have not been deposited. 

If the Undeposited Funds Acct does not show any entries or shows a $0 balance.  You might wasn't to try and Repair the Company file to see if it either removes the entry or fixes the file to show you why the entry is in the report.  (Obviously make a Backup of the Company file before running the repair.) 

Let us know what you find.  Very strange that you have the line item in the report if there is nothing in the UDF Acct.

Thank you for re-visiting this.  Yes, I'm in the Accountant version.  

Recap:  No customers, no invoices, no incoming payments.  But I saw where you mentioned that in QBDT the default is to the undeposited funds, so I went into preferences>payments and unchecked all the boxes, including "use undeposited funds as a default deposit to account."  

After changing the preferences, I shut and re-opened the file.  In this particular file, all the deposits are still showing in the cleanup screen. 

In the COA, the Undeposited Funds Account shows 0, which is good. I did not think to check that in the COA beforehand; I'm sorry.  I haven't made changes to preferences yet in the other file that is having this issue, but that  UDF account  is also showing 0 in the COA.  

I'm attaching a screen shot.  The client will be changing versions for year 2021.  My main concern at this point is that the 2020 and prior financials are correct.  If you think they are probably ok, (my calculations show they are) I won't worry too much about what shows on the screen shot.  

Thank you. 

Oh, and I had already tried the Vefify Data and Rebuild Data and found no problems.  I was unable to complete the Repair File and Network Problems, but hopefully when I'm successful that will clear up the problems.  Thanks again.