What are Undeposited Funds in QuickBooks & How to Rectify It?

If your QuickBooks is messed up due to undeposited funds account, then this article will guide you toward getting rid of the account entirely. Undeposited Funds In QuickBooks is a default account that records the funds you received from your clients as payments for your services rendered to them. This account holds the amounts until you deposit them into your real bank account. So, any payments you get through physical checks or sales receipts are recorded in this account. However, funds cannot be directly deposited in the Undeposited Funds as it is a temporary account, as payments are only added as single transactions. But most of the time, users do not utilize the account correctly, which creates a fuss in the books. Therefore, in the end, the figures won't match when reconciling transactions with the bank statements.

Handling QuickBooks, undeposited funds can get out of hand for a new or even a regular user, which is understandable. If you want to get rid of it with additional assistance, call at +1.833.802.0002 anytime.

How Does the Situation of Undeposited Funds Get Complicated?

When you do not follow the correct process, which is:

1. First, send an invoice to your client to get the payment.
2. So, your client will make payment for the invoice that leaves some balance amount in their account.
3. Then, you must deposit the required payment and keep a physical record.
4. Lastly, it would be best if you matched & verify the deposit with the payment respectively.

Now, when you do not go along with this procedure, it escalates the situation to get more complicated. So when you are not depositing the funds & rather recording it as a good income. Then, you add it to any income account under the banking tab in the QB software. Moreover, these payments become uncategorized in the income statement, directly making it an undeposited fund. Therefore, it is advised to keep a zero balance, as undeposited funds are the cause of inappropriate workflow.

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Fixing the Undeposited Funds Situation

Fixing the undeposited funds situation is important to rectify the mistakes made in the QB software. So, the following are the two solutions listed below:

Method 1: Bank Reconciliation

1. Deposit the funds in your bank account.
2. Then, verify the bank statement for cleared funds.
3. Then, with the feature of bank deposit, combine the transactions in QB's undeposited fund account.
4. Lastly, tally the total amount is the same as the bank statement amount.

Method 2: Dummy Account

1. First, in the Chart of Accounts section, create a new checking bank account with a different name & save it.
2. Now, from the Bank Deposit window, click on the dummy account you just created.
3. Now, select all the payments of your old clients under the undeposited funds. Then, save it & close it.
4. Now, you can see the balance will be nill in the undeposited funds account.
5. Now, don't forget to clear the dummy account as well.
6. Start by creating an expense transaction in the expense window.
7. Then, choose any income account to transfer the balance of the dummy account in it.
8. When the above step is complete, the balance in the dummy account will be nill.

Conclusion

As we are at the end of the article, we hope you learned about the reasons & solutions to fix the Undeposited Funds In QuickBooks effectively. However, if you get stuck at any time, call +1.833.802.0002 and chat with the certified team of experts.

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