Undeposited Funds - Accounting Software Secrets
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Undeposited Funds

Undeposited Funds

Undeposited Funds


This is a special QuickBooks created account.  Its sole purpose is as a clearing account for payments that have been received from customers using the receive payment or cash sales receipt options until they are combined in one deposit to the bank account.  In the older versions, it is not possible to make journal entries to this account (although you can, in newer versions, it is not recommneded, nor can you reconcile it).

Some practitioners prefer to change the name to Cash on Hand, since it is money that has been received, but not yet taken to the bank.  The problem in the author’s opinion with this approach is that, although it more accurately describes what the account is, it is not possible to change the type.  For that reason, it is presented on the financial statements with other current assets such as inventory or prepaid expenses.  A more correct place for this balance is with the bank accounts and other liquid assets. 

Usually the amount left in this account at the time that the financial statements are issued is a timing issue.  The receive payment and the make deposit are two different dates.  To eliminate the problem, make sure that the receive payment and the deposit date match.  If the money has been received and has not yet posted by the bank, using the deposit date the same as the receive payment will serve to show the amount as a deposit into the bank account as a deposit in transit.

More information on this topic

Chart of Accounts

Receiving Payments and Discounts