To the untrained eye, QuickBooks may have some ‘pesky’ accounts: the kind of account you aren’t sure what to with and wonder why it is even on the Chart of Accounts. Undeposited Funds may be one of those accounts. It is a valuable account when used correctly.

QuickBooks describes it like this, “Undeposited Funds” is a special account created by QuickBooks as a clearing account for payments that have been received but not yet deposited into the bank account.  The easiest way to picture this account is as the top desk drawer.  As the money comes in each day, it is entered into the computer, and placed in the top desk drawer.  This happens all day long.  At the end of the day, the drawer is opened and money is scooped up and taken to the bank.  At that point, the make deposit function is completed in QuickBooks to pull the undeposited funds onto a deposit slip.  The total of this deposit slip should agree with the bank statement at the end of the period.” The advantage to a lump sum payment is that your transactions are still itemized in the account register, but you only have to check the lump sum deposits when reconciling transactions with your bank statements. Simple enough?  Why then are there so many small businesses that don’t use this account correctly.”

A problem occurs when

  1. Payments are received on an invoice via ‘Receive Payments’ and that feature is linked to the ‘Undeposited Funds’ account but clients manually enter deposits and ignore the ‘Payments’ box that pops up.


  1. The ‘Bank Connect’ feature is used and all deposits are approved rather than matched up with payments already entered in QB.

If you or another small business finds themselves dealing with pesky accounts, give us a call here at Stapley Accounting Services.  We can help you in Logan and Cache Valley. YOU CAN DO THIS!