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How to Clear Undeposited Funds in QuickBooks?

Do you want to get rid of undeposited funds in your QuickBooks? Then this article is for you where you will know what it is and how to clear undeposited funds in QuickBooks.

In bookkeeping, your primary goal is maintaining a high accuracy level. When you match every dollar in with every dollar out, it’s easy to keep an eye on your transactions and manage in case of any financial discrepancies.

Even though bookkeeping is not a new concept, its latest reiteration has become complex. Because of this, there are many such areas where mistakes can happen.

One of the common issues is a buildup of undeposited funds in your QuickBooks. It is one of the easiest mistakes to make and, luckily, easy to fix.

So, let’s dig into this undeposited fund in your QuickBooks, what causes it and how to clear undeposited funds in QuickBooks.

What Causes Undeposited Funds in QuickBooks?

Undeposited fund account in QuickBooks is temporary accounts that QuickBooks use to hold on payments from invoices before you deposit them in your bank account.

A buildup of these funds occurs when you do not follow the industrial standard process for your money in transactions. The actual process is 

  • You send an invoice to your client.
  • The client makes the payment for the invoice, which results in some cash balance in their account.
  • You should deposit the required payment and keep a record at this step.
  • At last, you have to match the deposit with the payment.

But undeposited fund occurs when, rather than making a deposit and keeping a record of the payment as good income, you add it to any income account from the banking category of your QB account. This leads to an uncategorized income amount in your income statement, and the payment is held as an undeposited fund.

It is not unusual to follow an inappropriate workflow in QuickBooks, which results in undeposited funds in QuickBooks, but it is important to maintain a zero balance. 

Usually, undeposited funds occur when –

  • You get invoice payments.
  • When you make use of any payment item on an invoice.
  • When you create an entry of a sales receipt.
  • So, double-check to accomplish bank reconciliation for clearing all balances.

How to Fix or Clear Undeposited Funds in QuickBooks?

To fix or clear undeposited funds in QuickBooks, there are two methods you can follow.  

  1. Bank reconciliation
  2. Dummy account method

Steps to Clear Undeposited Funds in QuickBooks through Bank Reconciliation

  • Make the required deposits in your real-life bank.
  • Check the bank statement for the cleared funds.
  • Use the bank deposit feature to combine transactions in your undeposited fund account.
  • Look at the checkboxes for the undeposited payments you want to combine.
  • Make sure the total amount is the same as the amount in the bank statement.

Steps to Fix Undeposited Funds in QuickBooks through Dummy Account Method

  • Under the section, Chart of Accounts, make a new checking bank account and name it something that must sound fake so that it does not create confusion with the real account.
  • Save it and close.
  • Now open the Bank Deposit window.
  • Choose the dummy account you created in the choose account category box.
  • Choose all old consumer payments that you can see in your undeposited funds.
  • Save it and close.
  • Now the balance in your undeposited fund is zero, but next is clearing the dummy account you created.
  • Steps to clear the dummy account.
  • Click on the expense window to create an expense transaction.
  • Select an income account that you make use of for transferring money from a dummy account.
  • Now transfer the entire balance.
  • Now balance in your dummy account is also zero.

Frequently Asked Questions (FAQs)

How to Avoid Undeposited Funds in QuickBooks?

If you do not receive your payment by cash or cheque, then an important way to avoid such funds is by linking your bank and credit card accounts. With this, every transaction is downloaded automatically by QuickBooks.

What is the Main Purpose of Undeposited Funds Account in QuickBooks?

Undeposited funds in QuickBooks is a holding account that keeps track of all payments received from consumers who have not deposited in your bank account.

Also Read – How to Change Beginning Balance in QuickBooks?


So, in this way you can clear undeposited funds in QuickBooks to save time, enhance accuracy and decrease errors. When there are a lot of entries in your QuickBooks undeposited funds, it is necessary to clear them and it is often recommended to do it very carefully to avoid any mistakes.