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Jawad Kayani
January 12, 2023
Question

How do I apply an undeposited funds to a customer's unpaid invoices?

  • January 12, 2023
  • 1 reply
  • 0 views

Hi

 

I am working on cleaning up QuickBook Online, and there are many messy things. One of them is undeposited funds. Someone who used to work for the company posted an entry in which he debited the undeposited funds and credited the bank account. Now $16,000+ is outstanding in the undeposited funds. I need your opinion in this regard: what should I do with undeposited funds? I'm not sure what happened to the undeposited funds or why an entry was made.

 

I have two ideas:

1) Adjusting the undeposited funds against the other income accounts

2) apply undeposited funds against unpaid invoices.

 

But before implementing my ideas, I want to get an expert's opinion, so please guide me on what I should do with undeposited funds and how I can do it in QuickBooks online. Please share the adjustment process, as well as options and screenshots.

 

Kind Regards

 

 

1 reply

P
Pete_Mc
January 13, 2023

Does the $16,000+ represent thousands of transactions or a smaller more manageable number?  If you can, I'd delete the deposit that was made directly into Checking and then correctly making the Deposit from the Undeposited Funds Acct.  Be sure to make matching/correct deposits for the same amount and on the correct date that they were originally made.

 

But if we're talking thousands of transactions and it is not realistic to manually correct the issue, then I might do a single Split Deposit.  I'd make a large Deposit for all of the old entries in the UDF Acct and then add a line to the Deposit to Negate the amount to the same Sales/Income Acct.  So basically you'll have a $0 Deposit.  

 

If you go that route I would definitely run it by your CPA/Tax Accountant first to make sure they don't need to make any Journal Entries.  And certainly DO NOT cross a Tax Year when doing this without taking to your CPA!  So you could do 2022 assuming you haven't closed out the books, but don't do 2021 or earlier without talking to them. 

 

And a side note...  Using the UDF Acct is generally the best way to do things.  Just be sure to use the Banking > Make Deposit option to make the transition from the UDF Acct to the Checking Acct.

J
Jawad Kayani Author
January 13, 2023

Thank you for responding.

 

Actually, My Ex-Company Fellow, who left the company prior to my arrival, has made the following entry:

 

debited the undeposited account.

Credit the bank account with $16,000 or more.

 

He just posted a lump sum amount, and now the balance is in "Undeposited Funds." Bank reconciliations have been done. I don't have any evidence from the transaction to explain why he did it. I am working to clean up QuickBooks, and a lot of work is pending. The balance sheet is negative, undeposited funds are pending, and customers' negative balances are outstanding, so I need to know a quick and simple way, followed by a legal way. My personal suggestion is to transfer the undeposited balance to the Unearned Revenue account as a liability and then apply it to past pending customer invoices. What would you say?

 

Regards

 

Rainflurry
Rainflurry
January 13, 2023

@Jawad Kayani  

 

Yikes!  You mentioned the bank reconciliation has been done.  Did the $16K payment (credit) clear the bank?  If so, and you don't know where/why it went then you obviously need to figure out where it went.  If someone stole $16K, you will need to create a theft expense for $16K - debit loss by theft expense, credit undeposited funds.  If it never cleared the bank, just reverse the entry: debit bank account, credit undeposited funds.

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