Such a deposit will increase your bank deposit (by a debit) and increase your revenue (by a credit). For small transactions, you can bypass undeposited funds altogether by simply setting the “From Account” to be your revenue account (in this case, “unrestricted contributions”). When you use Make Deposits with the undeposited funds account, all you’re doing is moving funds from 1 asset account to another. From your question, it sounds as if you’ve missed the step of creating an item to be used on an invoice or sales receipt that points to a revenue account such as your “unrestricted contributions” account. Those concepts apply if you use other methods to record revenue as well. Then, the make deposits function moves the funds from undeposited funds to your bank account. If you use a Sales Receipt and you receive a $100 contribution and you are using an undeposited funds account, then undeposited funds gets debited and the account associated with the item on the sales receipt (which could be “unrestricted contributions”) gets credited. There are many ways to do this: Sales Receipt, Invoice, or General Journal Entry. Let’s say you want to record a contribution. If the account balance reflects an unusually high balance, that indicates that either funds aren’t being deposited in a bank account immediately – or that some of the required processing steps when using the Undeposited Funds account have been skipped. The Undeposited Funds account balance should only reflect those funds that have been received by a company but not yet deposited in the bank. Examining the Undeposited Funds register will usually reveal the source of the problem. In that situation, customer AR reports will be accurate because customer receipts have been recorded, but the bank balance will be inaccurate because those payments have not been grouped into bank deposits and recorded in the bank account. Depending on preference settings, QuickBooks creates and assigns special account types to certain general ledger accounts, and these special account type settings aren’t clearly marked in the program.Ī common QuickBooks bookkeeping problem can occur if the Use Undeposited Funds as a default deposit to account is selected but deposits are not made using the Banking->Make Deposits function. Likewise, simply assigning the name Undeposited Funds to an account won’t by itself cause it to behave like this special account. You can safely rename the Undeposited Funds account that QuickBooks automatically creates without changing the function of this account. Note: Enterprise Solutions users will find this preference on the Payments sub-menu. Click on the Sales & Customers sub-menu on the Company Preferences tab and check the box on the Use Undeposited Funds as a default deposit to account. Click on the Edit->Preferences menu selection to open the Preferences window. In order to use the Undeposited Funds account, you first need to enable this preference. That doesn’t match actual practice and complicates bank reconciliations because the amounts recorded in the bank register won’t match what appears on the bank statement. If customer receipts had not been first put in Undeposited Funds as a holding account, each individual receipt would appear as a deposit in the bank account register. Making a bank deposit in this manner results in a credit to the Undeposited Funds account and insures that the transaction recorded in your bank account register matches the actual deposit made to the bank. Receipts from several customers can be grouped by clicking on the Banking->Make Deposits menu selection and selecting those receipts that make up the total deposit. A customer receipt results in a debit to Undeposited Funds pending deposit in a bank account. By using the Undeposited Funds account as a holding account, your accounting for customer receipts can match actual practice and simplify bank reconciliations. In actual practice, these individual receipts are grouped into a bank deposit that consists of funds from several customers.
When you record customer payments by clicking on the Customers->Receive Payments menu selection, you’re recording individual receipts. The Undeposited Funds account is an Other Current Asset account that’s automatically created by QuickBooks to record funds received by a company that are not immediately deposited in a bank account.
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