Chuckle….good ‘ole Undeposited Funds. A really helpful account that stumps a lot of people! The default in QuickBooks is to post payments entered through the “Receive Customer Payment” window or on a Sales Receipt to this holding account. There…that’s all it is! A holding account.
Some businesses may receive payments over several days and deposit them once per week. Others may deposit more frequently, but occasionally hold a received payment to deposit later. This account allows you to record the individual payments as you receive them and then group them together into one bank deposit.
When you review and reconcile your bank statement (a MUST DO task), you will easily be able to match up the bank records with your QuickBooks activity. Let’s not forget that one of the first things you would need to hand over if audited would be your bank statements. And since the IRS can now ask for a copy of your QB file during an audit, it would be in your best interest if the information matched easily.
Can you turn it off? Of course! If this model doesn’t work for your business, you don’t mind seeing individual payments posted to the bank account, or you just would like the option to choose which account when you are recording the payment, you can easily turn it off:
- From the menu bar, go to Edit > Preferences > Payments, company preferences tab
- Uncheck the box that says “Use undeposited funds account as default deposit to account“
Now you will see an option on the “Receive Customer Payment” window and on Sales Receipts that will allow you to select which bank account to post the payment to.
Watch the short video to see the workflow for using Undeposited Funds in QuickBooks.
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