If you see a balance in Undeposited Funds on your balance sheet, you need to investigate. Here’s what you need to know about QuickBooks Online’s Undeposited Funds account to keep your business accounting operations running smoothly. We believe everyone should be able to make financial decisions debit credit rules with confidence. When business is thriving, bookkeeping has a way of sneaking up on you. Learn how to put payments into the Undeposited Funds account in QuickBooks Desktop.

Keeping the Undeposited Funds account accurate

You received the check on the last day of the year, which happened to be a Saturday. Both the Undeposited Funds and Petty Cash accounts are used to record cash related transactions. However, the Petty Cash account is used exclusively to record daily expenses or income from business operations. By default, QuickBooks puts sales receipt payments into the Undeposited Funds account. All you have to do is create a sales receipt and QuickBooks handles the rest. Why not set up QBO to make deposits directly into the bank account as a default?

Dummy Account Method

When the deposit clears the bank, you will be able to match the deposit in your bank feed. If you don’t use the bank feed function in QuickBooks Online, you will still be able to easily reconcile the deposit when you get your bank statement. Make sure you select Undeposited Funds from the “Deposit To” drop-down menu, then save the transaction. Your customer has given you a payment for goods purchased or services rendered. If your customer is paying an invoice you have entered into QuickBooks Online and sent to them, you will want to record the payment using the Receive Payments option. Let’s say your customer sent you a check for services rendered.

How to use QuickBooks Online’s Undeposited Funds account

Again, make sure you are selecting Undeposited Funds from the “Deposit To” drop-down menu, and save the transaction. The information provided here is not investment, overpayment of benefits tax, or financial advice. You should consult with a licensed professional for advice concerning your specific situation. It’s good to periodically check your Undeposited Funds account and clear out any payments waiting to be moved. Here’s how to put payments into your Undeposited Funds account before you combine them. The “normal” balance for the Undeposited Funds account is $0.

1. This is the best way to record payments that have not yet been taken to the bank.
2. For example, let’s say Willie’s Widgets paid you $300, Wally’s Whatsits paid you $750 and Whitley’s Whosits paid you $200.
3. The Undeposited Funds account is used to track and record such amounts.
4. You don’t need to combine payments or move them to an account.
5. In the above scenarios, you’ll likely find the transaction in the undeposited funds account.

This sounds like a good idea in theory, and it even works when you are a small solopreneur. You’ll find that there are not enough hours in the day, or days in the week, to get all your work done. If your bank records a single payment as its own deposit, you don’t need to combine it with others in QuickBooks. Instead, you can put the payment directly into an account and skip Undeposited Funds. Now you can select an Undeposited Funds or another account each time you create a sales receipt.

Our partners cannot pay us to guarantee favorable reviews of their products or services. For a tutorial on how to use this account, we have put together a step-by-step instruction guide. While you are most likely familiar with the navigation system of QuickBooks, it may be difficult to net terms find new accounts, especially if the system has been set up by someone other than yourself. Have you ever been in your Chart of Accounts and noticed Undeposited Funds? It’s possible that you’ve seen it many times without knowing much about it, or when you should use it. Well, get ready to learn something new and take a thorough look at Undeposited Funds.

Most QuickBooks Online users find it easier to always post to the Undeposited Funds account first, and then enter the deposit into QuickBooks Online separately. Doing this does result in an additional step, but memorizing one way of recording payments is easier than having to remember multiple processes. For example, let’s say Willie’s Widgets paid you $300, Wally’s Whatsits paid you $750 and Whitley’s Whosits paid you $200. You batch these payments into one deposit totaling $1,250. However, you need to properly credit each customer for their payment. Posting each payment to the Undeposited Funds account and then recording the deposit in QuickBooks Online allows you to do this.