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Bank Deposits and Undeposited Funds

Forum|Forum|1 year ago
March 20, 2025
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This is a long post with several questions - sorry.

We have a Cash Box in our home.

When we started with QBO several weeks ago, I thought the Undeposited Funds could simply be equivalent to our Cash Box, so I entered the amount in the box as the opening balance (equity) of Undeposited Funds.

I have gotten 20 contributions which I've added to Undeposited Funds in QBO and to our Cash Box. Now there are a total of 21 line items in Undeposited Funds - the 20 contributions and the opening balance.

Then I deposited money in our bank.

The amount of the deposit was greater than the 20 contributions by about $500 U.S. but less than the total in the Cash Box.

Now I can't figure out how to enter the Bank Deposit in QBO because:

a) There seems to be no way to split the Opening Balance in the checklist to make up the difference.

b) If I try to bypass the Opening Balance and enter part of it in the table beneath for additional deposits, the system won't let me because the Undeposited Funds is not a bank!!!

c) I can't change the Undeposited Funds account to be a bank.

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I can think of four workarounds and want your opinion:

Do I make a journal entry to split the equity? How? (This feels the cleanest if I can be shown how to do it.)

Do I create a separate account for cash on hand and transfer the $ from the Undeposited Funds to the Cash on Hand as necessary?

Do I create a separate account for cash on hand, edit the transactions so that they are in the cash on hand account, and use it in the future, bypassing the undeposited funds altogether?

A related question to all of this: I experimented and if I deposit two checklisted items, they are not combined in the deposit. Instead, the Bank register is split. There's no way around that, is there? Each of them eventually needs to be resolved.... Given that, maybe the best is to have a separate Cash-on-Hand account?

Oh, well.

Thanks for your patience in reading my little tome.

Any help would be greatly appreciated!

QuickBooks Online

Best answer by MariaSoledadG

Undeposited Funds and Bank Accounts refer to different concepts. I'm here to provide the distinction between the two to guide you through the process, LCUUF.

The Undeposited Funds is a temporary account used to hold payments you receive but have not yet deposited into your bank account. This serves as a holding area for cash or checks that you plan to deposit.

While bank accounts like checking, savings, and petty cash accounts represent actual bank accounts that your business owns and the real money available to the business.

When you receive a payment in QuickBooks, it is automatically recorded in your Undeposited Funds account. When you're ready, you can consolidate all payments into a single deposit transaction to your bank account.

You'll also have the option to select the Cash Box account. under the Deposit To field at the time of receiving the payment. This allows you to allocate the amount directly to the Cash Box account instead of placing it in Undeposited Funds. I've added a screenshot for your visual guide:

Next, move the amount from the Cash Box account to your actual bank account.

To give you an overview of how Undeposited Funds works, check this article for more details: Deposit Payments into the Undeposited Funds in QuickBooks Online.

Additionally, learn how to categorize downloaded transactions once you connect your bank. Go through this article for reference: Categorize Online Bank Transactions in QuickBooks Online.

Post your reply below if you have any other follow-up questions about Undeposited Funds and bank deposits. I'll be one post away if you need further assistance.

Rainflurry

@LCUUF

Create a bank account in QBO called Cash Box. Then, make a transfer (New > Transfer) from Undeposited Funds (UF) to Cash Box for the amount of your opening balance equity (OBE) that you are leaving in the Cash Box. You should now have the 20 contributions and the amount of OBE that you're depositing sitting in UF. Go to New > Bank deposit and select the 20 contributions plus the Transfer and you should be all set.

Rainflurry

@LCUUF

EDIT: "Go to New > Bank deposit and select the 20 contributions plus the Transfer and you should be all set. "

The amount that makes up the amount of OBE being deposited will show up on your Bank Deposit screen as a couple of different line items depending on how the original OBE amount was entered into UF.

J

JeveeAdvin__la

Yes, creating a separate account for Cash on Hand in QuickBooks Online (QBO) is a practical solution for your scenario, LCUUF. This is the closest option we have because the Undeposited Funds (UF) account is one of the default accounts in QBO and has a specific function. I'd be glad to detail this to you.

I appreciate your efforts in managing your organization's finances. I'm interested in understanding how the opening balance entry in the UF account was initially recorded. This information will help us provide more accurate guidance on reallocating the funds to the appropriate accounts.

If the entry only shows the actual cash amount in the Cash Box when you started using QuickBooks Online (QBO), consider deleting this incorrect entry. After that, you can accurately re-enter the amount while setting up a Cash on Hand account, which will help you effectively monitor the cash in your Cash Box.

Here’s how to up a petty cash account:

Go to the Gear icon, and then select Chart of accounts.
Select New.
Choose Bank from the Account type dropdown.
In the Detail type dropdown, select Cash on hand.
Enter Petty Cash (or Cash Box) in the Account name field.
Since you already have money in your cash box, enter the amount in the Starting date and opening balance field and choose the correct as-of date.
Select Save.

To move contributions into your bank account, you'll first need to record a bank deposit and post it to your cash box account in QuickBooks Online (QBO). After that, you can transfer the funds from your cash box to your bank account. Since you mentioned that you will be depositing 20 contributions into your bank account, we can edit the deposit suggested to ensure that it's correctly posted to the designated cash box account.

Follow these steps:

Find the bank deposit entry for the 20 contributions.
From the Account dropdown menu at the top left corner, select the cash on hand account you created.
Review the other details, then Save and close.

Next, create a transfer entry from your cash box account to your bank account to indicate that the contributions have been transferred: Transfer funds between accounts.

For managing the cash inflow and outflow of your cash box account in QBO, refer to this article as a guide.: Set up and use petty cash in QuickBooks Online.

Before we wrap up, I suggest you explore QuickBooks Live Bookkeeping to streamline your accounting, maintain precise financial records, and access professional support. This could free up valuable time, allowing you to concentrate on expanding your business.

By following these steps, you should have a clearer structure for managing cash transactions and bank deposits in QuickBooks Online. If you have more questions, feel free to return for assistance. Have a nice day ahead.

L

LCUUFAuthor

This was extremely helpful. We have just begun to set up QBO and will simply delete the file and do it correctly.

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