Step-by-Step Guide to Using the Undeposited Funds Account in QuickBooks Desktop

What is the Undeposited Funds Account?

The Undeposited Funds Account in QuickBooks Desktop account in QuickBooks Desktop acts as a temporary holding account for payments you’ve received but haven’t yet deposited into your bank. It allows you to group multiple payments into a single deposit, ensuring your QuickBooks records match your actual bank deposits.

Step 1: Enable Undeposited Funds (If Not Already Enabled)

By default, QuickBooks Desktop automatically records payments in the Undeposited Funds account. However, to ensure it’s enabled:

1. Go to Edit > Preferences.
2. Click Payments in the left panel.
3. Select the Company Preferences tab.
4. Check the box that says Use Undeposited Funds as a default deposit to account.
5. Click OK.

Step 2: Receive Payments into Undeposited Funds

When customers make payments, record them in QuickBooks:

1. Click Customers from the top menu.
2. Select Receive Payments.
3. Choose the Customer Name and enter the payment details (Amount, Date, Payment Method, etc.).
4. Under the “Deposit To” dropdown, select Undeposited Funds.
5. Click Save & Close (or Save & New to enter another payment).

Note: Each payment stays in the Undeposited Funds account until you record a bank deposit.

Step 3: Deposit the Payments into Your Bank Account

Once you have received multiple payments and are ready to deposit them:

1. Click Banking from the top menu.
2. Select Make Deposits.
3. A pop-up window will show payments sitting in the Undeposited Funds account.
4. Check the payments you want to group into a deposit (matching what you will deposit in the bank).
5. Click OK.
6. In the Make Deposits window:
   • Choose the bank account where the money is being deposited.
   • Enter the deposit date.
   • (Optional) Add Cash Back details if needed.
7. Click Save & Close.

Step 4: Verify the Deposit in Your Bank Register

To confirm the deposit is recorded correctly:

1. Click Lists > Chart of Accounts.
2. Open your bank account register.
3. Locate the deposit—its total should match what was actually deposited in the bank.

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Why Use the Undeposited Funds Account?

• Ensures QuickBooks matches your actual bank statements.
• Helps when receiving multiple payments (cash, checks, credit cards) and depositing them as a single transaction.
• Prevents errors where each payment is recorded as a separate deposit, which wouldn’t match your bank.