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Level 2

Invoice Payment - Undeposited Funds - Owner Cashing Checks

Hello. I am cleaning up a client in Quickbooks Online. I noticed had a very large amount in the undeposited funds category of the report. After speaking with the owner, they were invoicing the client. Then, when the client would pay, they would cash the check and keep the money. However, they would go in and mark the invoice as paid resulting in the payment getting booked to the undeposited funds. 

 

My question is do I need to do a journal entry to move this to an owner's draw for the amounts? Not sure how it would look as I have never had this happen before. 

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Best answer July 31, 2020

Best Answers
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Community Champion

Invoice Payment - Undeposited Funds - Owner Cashing Checks

To clear UF you need to perform one or more Deposit(s). Journal entries are not sufficient in this situation and will not properly clear the UF transactions, only make the sum = 0.

 

Create a dummy clearing bank account if you do not have one already. Deposit all the UF to the dummy account, then post expense/check from that account to owner draw.  You cannot directly deposit to equity accounts

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2 Comments
Highlighted
Community Champion

Invoice Payment - Undeposited Funds - Owner Cashing Checks

To clear UF you need to perform one or more Deposit(s). Journal entries are not sufficient in this situation and will not properly clear the UF transactions, only make the sum = 0.

 

Create a dummy clearing bank account if you do not have one already. Deposit all the UF to the dummy account, then post expense/check from that account to owner draw.  You cannot directly deposit to equity accounts

View solution in original post

Highlighted
Level 2

Invoice Payment - Undeposited Funds - Owner Cashing Checks

Thank you, that's what I was thinking as I have used clearing accounts in the past. It has been a learning curve!

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