We know when some deposit amount is available to deposit into a bank that is an undeposited fund.
When any customer of you pays by Check, and you keep that in the drawer. Question is how to record the transaction of receiving a check against sale. As we don’t deposit that check into bank immediately that’s why we will record check receive as follows:
- Go to invoice panel
- Click receive payment
- Select ‘Undeposited fund’ as ‘Deposit to’
Behind the scene there would be a journal like this created system:
Undeposited Fund Dr
Accounts Receivable Cr
Now if you go to the balance sheet, you will see accounts receivable is zero. Because, we just close the accounts receivable by a previous entry. We also see that the ‘Undeposited fund’ amount is increased by the same amount.
After some days those checks available into the undeposited fund would be deposited into the bank. Say we will deposit that check after 7 days of receipt.
Then we have to go to :
- Plus menu
- Click bank deposit
- Tick mark that check
- and click save.
Note: Whenever you go to the bank deposit option you will find a list of outstanding checks available to the deposit bank.
After completing the transaction a journal entry created behind the scenes, that is :
Undeposited Fund Cr
Now, go to the banking panel. There you will find a match with a waiting for review transaction of bank deposit. You can match that from there.
Now, If you check the balance sheet we will find that the undeposited fund is zero.
Naturally undeposited funds would be a payment of a check. By other way you will find undeposited funds. That would be payment received by QBO payment method.
That means you send an invoice to your client through QBO. And customers pay through the QBO payment link. In that case that payment will show in an undeposited fund account. And for this accounts receivable for particular customers will be closed. That journal entry behind the scene would be same:
Undeposited fund Dr
Accounts receivable Cr.
In this situation your responsibility is to match that transaction into the bank panel.
If you find a big amount of money in an undeposited fund that might be an incident of not recording undeposited funds into the bank, rather the client or bookkeeper would record sales for bank balance.
And that incident increased the total amount of sales and the amount of undeposited fund remained the same as before. As we already recorded sales when handling the invoice for that sale. If you check the balance sheet and profit and loss you will find sales income would be double for wrong entry of bank amount as sales.
To correct this wrong entry follow these steps:
- Go to bank
- Find that transaction from categorized transactions.
- Undo the transaction
- Go to bank panel and math the invoice payment stay in undeposited fund
After this system has generated a journal entry:
Undeposited fund Cr
Now we will run a balance sheet report. We will see that there is no undeposited fund or amount will be decreased by the above entry amount.
So, now you know that, whenever you find ‘Undeposited Fund,’ then you have to investigate ‘money in’ transactions. Check every ‘money in’ transaction are those really sales. If those are not real sales than those are responsible to increase sales amount and resulted ‘Undeposited Fund,
Question is how to handle the wrong entry of undeposited fund noted above.
To handle these you have to go to the bank panel. For there find those wrongly recorded sales in the reviewed section and undo those. Now undo transactions will return to the bank panel for review. Record those transactions as Undeposited Fund. System will record those behind the scene as follows:
Undeposited Fund cr
Now if you run balance sheet report then you will see that there is no Undeposited Fund.