Undeposited Funds in QuickBooks

Undeposited Funds in QuickBooks is a current asset account. It is similar to Cash On Hand. This account is used by a business to track money it has received, but not yet deposited. Unlike Petty Cash, which is normally not meant to be deposited, a business will at some point, deposit its Cash on Hand. That is why it is called Undeposited Funds.

This account in QuickBooks is a holding place for cash and checks from cash sales until the money is deposited. It also holds funds from credit and debit card sales which makes it similar to the old Credit Card Vouchers asset account. With each of these types of payment, the money is not immediately deposited by a business. Most businesses will deposit cash and checks in the bank each night or the next day. Credit card sales usually take 24 hours or more to be deposited by a credit card processing merchant into the business account.

The Undeposited Funds account is very useful for retail businesses that have numerous sales throughout the day. It allows the bookkeeper to group the correct payments with each deposit. This is especially helpful in the case of credit and debit card payments where the money is not deposited into the bank on the same day as the sale.

Receiving Payments on Invoices

With bookkeeping in QuickBooks, when you receive payment on an invoice you have the option of depositing that to bank account directly from the ‘Receive Payments’ window or sending it to Undeposited Funds. Just choose which account you want the money to go to from the ‘Deposit To’ drop down menu. If the payment you are receiving is the only one for that day, you could deposit it directly to the bank account if you are putting it in the bank that day or you are doing your bookkeeping after the fact.

In the online version of QuickBooks you also have the option in the ‘Receive Payments’ window to choose which account to deposit the money into.

It is not necessary when doing after the fact bookkeeping to put a single payment into Undeposited funds. It creates an extra unnecessary step. On the other hand if you receive multiple payments and deposited them on the same day, it would be best to send them to Undeposited funds first. This way the different payments are grouped together in the same deposit like they are on a deposit slip. This will cause the total amount of the deposit to match the amount on your bank statement and keep you from having to add separate amounts when doing bank reconciliations.

Depositing from Sales Receipts

When you create a Sales Receipt in QuickBooks the software considers the payment received because the customer paid at the point of sale. Because of this, the option to send the money to Undeposited Funds or the bank account is on the Sales Receipt itself.

This is true if the customer paid with cash, check, debit card or credit card. This option is found at the bottom of the window. Just choose the correct account from the ‘Deposit To’ drop down menu. Again, if you are creating more than once sales receipt in a day it is best to use Undeposited funds.

Setting Default Deposit To Account

Here is how to set Undeposited Funds as the default ‘Deposit To’ account in QuickBooks. Go to ‘Edit’, ‘Preferences’ and select ‘Sales & Customers’ from the left side menu in the ‘Preferences’ window. In the middle section of this window, choose the ‘Company Preferences’ tab. At the bottom of this tab are options for ‘Receiving Payments’. Make sure the checkbox is marked next to ‘Use Undeposited Funds as a default deposit to account’.

You can’t set a default ‘Deposit To’ account for Sales Receipts, but once you choose it as the option for one receipt and save that transaction, it will recall that account for the next receipt you create.

Depositing the Money to the Bank

In order to deposit money from ‘Undeposited Funds’ to the bank account, go to the ‘Banking’ menu at the top of the program, and choose ‘Make deposits’. In the ‘Payment to Deposits’ window that opens, place a checkmark next to each payment you want to group in the specific deposit you are making. Be sure the subtotal at the bottom is correct once you have selected your payments and choose ‘OK’. This will take you to the ‘Make Deposits’ window and you can select the correct bank account to deposit it to and the date.