The account for undeposited funds is intended to be used only temporarily. It's exclusive to QuickBooks Online and its major objective is to simplify bank reconciliations. Normally, the bank will consolidate all of the separate checks you deposit in one trip into one transaction. In other words, the information on your bank statement and your itemized bank deposit sheet are not the same.
By completing a bank reconciliation, this account is expected to be cleared. the following steps:
- Deposit the necessary funds at your actual bank.
- Wait for the cleared monies to appear on the bank statement.
- To combine transactions in your undeposited funds account, use the bank deposit tool.
- The undeposited customer payments you intend to combine are marked with checkboxes.
- Verify that the sum is the same as what is shown on the bank statement.
- Using an incorrect workflow in QuickBooks frequently results in a balance.
The balance, however, must always be zero.
Many unskilled users are unaware that the following circumstances apply when this particular account is the default Deposit To account:
- As soon as you have invoice payments
- When a payment item is used on an invoice (such as when you receive a deposit or partial payment)
- Once a sales receipt is entered
You'll probably discover the transaction in the undeposited funds account in the cases mentioned above. Thus, ensure that the bank reconciliation is correctly carried out in order to eliminate the balance.
Here is an alternative strategy to clear the balance if you can't link an old transaction that appears in your undeposited account to a bank transaction:
- Create a new checking bank account under your Chart of Accounts and give it a fake-sounding name to prevent others from mistaking it for a legitimate account.
- Publish and close.
- Go over to the bank deposit window.
- In the choose account dropdown box, pick the fictitious bank account you just created.
- Choose the previous customer payments that are still shown in the account for undeposited funds.
- Publish and close.
You have a dummy account that needs to be cleared, however your undeposited funds account currently has a balance of 0. then take these actions.
- To make an expense transaction, click on your expense window.
- Choose a recurring income account to which you can send funds from your fictitious account.
- Transfer the full balance.
- Now your dummy account balance is at 0 too.
Note: If possible, consult an accountant for help with the dummy account method because you may have to explain what you did in the case of an audit.
Due to its lack of intuitiveness for untrained users, many users have considered this account to be tedious.
You have to go an extra step and make numerous entries for every deposit (one to the undeposited funds account and the other to the right account). Nonetheless, it is advantageous for companies who frequently receive payment via check or cash and prefer to physically deposit the funds at the bank as opposed to using mobile check deposits.
Accepting credit cards or other online payment methods like ACH is another approach to avoid the laborious process. Because each transaction is processed as a unique transaction, eliminating the possibility that it would appear as a lump sum payment on your bank statement, doing this enables you to skip the lengthy processes.