Negative Balance in Undeposited Funds (QuickBooks Online)

Thanks for coming by, @CIO2Go.

I'll make sure you're able to clear the negative amounts of your Undeposited Funds. The credit account of your journal entry is where you offset the negative balance. You can check the accounts you use in your journal entry to verify.

Here's how:

1. Go to +New, then choose Journal entry.
2. Tap the icon with a counter-clockwise arrow in the top left corner. 
3. Scroll down and click View More.
4. Locate the entry you've previously created and then click to open.
5. Verify the Account column. You should use the Undeposited Funds account to Debit and your bank account to Credit.
6. If it's an incorrect account, you can edit it to correct the entry.
7. Click Save and close. See the images below.

After that, proceed to +New and then Bank deposit to offset the value. The total amount should be zero. Check this guide for details: 

How to clear negative entries from Undeposited Funds and the Bank Deposit screen.

Feel free to also browse this link here if you need help with other tasks in QBO. It has topics with articles that'll guide you along the way.

You can always reply to this post if you still have questions and I'll get back to you as soon as I can. Take care and stay safe.

Thank you so much for the response.  The previous journal entry I removed because it wasn't working.  So I have recreated it per your instructions.  The link to the other instructions for offsetting is what I was following in the first place. 

 I have attached a PDF with snapshots of the Journal Entry and the Make Deposits window.  This is where I am stuck.  

Did I miss a step?  

CIO2Go

Hi there, CIO2Go.

I want to make sure you’ll be able to clear the negative balance on your Undeposited Funds account.

To rectify the issue, I have to review how the transaction is recorded in QBO. I appreciate it if you can attach the snapshots again to get me on the same page.

I’m looking forward to your response. Thanks in advance. Have a great rest of the day.

Hi Rasa-LilaM,

Happy to provide what I have thus far.  Here is the PDF I uploaded yesterday containing snapshots of the Journal Entry and the subsequent Make Deposits window.  Per what I've read, I should see two transactions to clear in the Make Deposits window but only 1 shows up.

CIO2Go

Your screenshot is correct, CIO2Go, 

You'll only see one journal entry since you only recorded a lumpsum amount to zero out the negative amount. The credit side of your journal entry is where you offset the negative balance. To resolve issues with negative transactions in Undeposited Funds, make a zero value deposit and record the negative value deposit with it.

Use the following steps shared by my colleague, @ShiellaGraceA, to help you create a Journal entry and offset the value of a negative deposit in Undeposited Funds.

You can use this link for more details on how to clear negative entries from Undeposited Funds and the Bank Deposit screen. For more information, you can use this article about Undeposited Funds: What’s the Undeposited Funds account?.

Let me know if there's anything else that you need help with. Take care and have a great day!

This doesn't apply when the Undeposited Funds account on the Balance Sheet reads a negative balance and it's negative in the COA list but when you go to "Make Deposits" there's nothing there as if it's zero.

When I create a journal entry as instructed, it show's up in Make Deposits, but when I select the journal entry it wants to add that amount to the bank. If I save it, It adds the amount right back into undeposited funds. I'm at a loss. I don't even know what happened. It was correct on October 2021. And then on the November 2021 reports it showed the negative amount but Make Deposits is still empty of txns. I went back to see when the problem occurred and it went back to 2017????? Something happened within the month of November 2021 but I can't find anything in the audit log.

Hello there, @TMarrs. Let me help you fix the negative amount of your Undeposited Funds account that affects your balance sheet in QuickBooks Online (QBO) to keep your financial data accurate.

When the Undeposited Funds account on a balance sheet (cash basis) reads a negative balance, it's typically caused by accounts receivable transactions (i.e., receiving payment entries that aren't applied to invoices).

With this, you can pull up and review the Customer Balance Detail report to find unapplied payments. To do this, here's how:

1. Go to Business overview, and select Reports.
2. Locate and select the Customer Balance Detail report.
3. Review the report to identify any unapplied payments.

Once you've identified unapplied payments, you can apply them in Accounts Receivable (A/R). Here's how:

1. Go to Bookkeeping, select Transactions, then select All Sales.
2. On the All Sales tab, select Filter.
3. From the Type dropdown list, select Money received.
4. Select the customer name from the list.
5. Click Apply. 
6. Locate and select the unapplied payment to open the Receive Payment window.
7. In the Outstanding Transactions section, select the invoice or invoices to which the payment should be applied to.
8. Select Save and close. 

On the other hand, in your case, you may also leave the balance as it is if they don't affect the Profit and Loss report. However, your accountant can reverse the A/R balances using the proper accounts.

In case you've decided to create a journal entry, I would encourage you to consult your accountant. Then, make sure to enter a date of the end of the period and set it to reverse on the following day. 

For the step-by-step guide, please see this article's Transactions affecting a balance sheet section: Resolve accounts receivable or accounts payable balances on a cash basis balance sheet in QuickBooks....

Also, the general recommendation is to maintain one A/R account in QBO. You may want to check out this article to further help you organize your books: How to group your Accounts Receivable account type.

Please keep me posted on how it goes in the comments below. If there's anything else you need or concerns about managing your Undeposited Funds account in QBO, I'll gladly help. Take care always, @TMarrs.

Well, I appreciate what you put into that answer, however still, that's not the issue. And just so you are aware (not to boast but to share that I'm highly knowledgeable) I'm an expert professional bookkeeper 43 years, 30+ years using QuickBooks Desktop and QBO Pro Advisor for 5 years.

Here's what's going on more specifically....

The UF balance was zero as of 10/31/2021 and became -2,243.86 in the month 11/30/2021

The Balance Sheet shows the negative balance -2,243.86

The COA shows the negative balance -2,243.86

Make Deposits shows no activity

The Undeposited Funds account (with the negative balance -2,243.86) shows transactions that have been reconciled and some that have not been when looking at a quick report. Wonder if that has something to do with it.

But no matter what I've tried to do it (journal entry) it leaves a transaction behind in Make Deposits that will adjust the UF balance.

Hey Tmarrs

Like you I have been using Desktop for 30 Plus years

Qucikbooks Online since it came out about 9 years now

I am a CPA working in accounting since 1980 as well. 

Same problem and have tried everything to fix it. 

No matter what I've tried to do it (journal entry) it leaves a transaction behind in Make Deposits that will adjust the UF bala

I am facing a worst issue. After making the JE. Ingo to the Bank Deposit window and nothing pops up there. No JE, no payment to select them to make the deposit 0. 

The JE makes the UF 0 but it adds that amount in the bank, which is incorrect. And I am dealing with negative 16k.

I have a similar issue there are no negative or positive entries on Make deposit page to off set it. I am talking about negative -16000 approx. It is just bad accounting. in past years. That amount sows up on the balance sheet which is not right. I am talking about a non-profit organization which has no use of undeposited funds. 

i was wondering if the opening balance can be brought to $0 for this year so that the past mistakes remain the past and do not show up on the balance sheet of tis year? Will this affect the checking account?