QuickBooks Undeposited Funds

What is the Purpose of the Undeposited Funds account in QuickBooks?

The Undeposited Funds account is part of the suggested work-flow for Accounts Receivable. There are typically four common steps to processing Accounts Receivable transactions:

  1. Create an invoice, sales receipt, or statement charge
  2. Receive customer payments
  3. Optionally, place payments into the Undeposited Funds account (preference setting will automate this
  4. Complete the Make Deposits form, grouping the multiple customer payments onto a single Make Deposits form in QuickBooks

The Undeposited Funds account is needed to hold payments received but not yet deposited. When you receive payment checks from your customers, you place them in your safe and then later take them to the bank; your Undeposited Funds account serves a similar purpose to your safe.

This account also plays an important role in making the bank reconciliation process easier and potentially more accurate. For example, if you normally list multiple customer payments on one deposit ticket taken to the bank, you need to match this deposit ticket total to the amount recorded in QuickBooks.

By setting the preference (Edit-Preferences-Payments-Company Preferences) to have QuickBooks automatically forward all your customer payments into a temporary Undeposited Funds account, you can then conveniently “group” these individual payments in QuickBooks using the Make Deposit form, so that your bank register deposit total matches the records on your bank statement.

Categories: QuickBooks Technical
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