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BBA7
February 9, 2024
Question

undeposited funds leftover from 2020

  • February 9, 2024
  • 2 replies
  • 0 views

Hi! I just started working on a new client's books. They have about 16K in undeposited funds. For some, but not all of the items, there are outstanding invoices in the customer's A/R account for those approximate amounts. (My client is a landscaper, so his estimated invoices and final paid amounts are often different.) 

 

My question is: Can I go and uncategorize the deposits in the checking feed and then apply them to the customer account eventhough they affect a previous year? I have a feeling that income in 2020 was overstated... so that seems like it would be bad to date it back to 2020.

 

So if I can't/shouldn't go back and fix 2020, how do I fix it now? 

 

Thank you

2 replies

S
SarahannC
February 9, 2024

Hello there, Barden.

 

I'm here to help you deal with a situation where undeposited funds from 2020 need to be reconciled with outstanding invoices in the customer's accounts receivable. 

 

If your client's account is set to the Cash basis, it will have an impact on the previous year. However, if they are using the Accrual basis, you can go to the bank feed and undo the deposits. Then, recategorize them to the appropriate customer account.

 

  1. Go to the Transactions menu.
  2. Click Bank Transactions. In the Categorized section, find the deposits.
  3. Select Undo.
  4. Go back to the For Review section and change the account.
  5. Match the deposit to the appropriate invoice.

 

On the other hand, you can make adjusting journal entries from your client's QuickBooks Online company file. Just make sure to use the correct account for this. You can check this article for tips and details: Create and review adjusting journal entries.


Please let me know if you have more concerns about QuickBooks. I'll be around to help. 

Rainflurry
Rainflurry
February 9, 2024

@BBA7 

 

"My question is: Can I go and uncategorize the deposits in the checking feed and then apply them to the customer account even though they affect a previous year?"

 

If you uncategorize the deposits(?), you will be affecting previous years so you don't want to do that.  Once you determine why there's a balance in UF, you can reverse it in 2023.  The question is how did the funds get into UF?  Is the balance in UF positive or negative?  If it's positive, the only way it got there is by an invoice payment receipt (which would reduce A/R), a sales receipt or a journal entry (maybe I'm missing one).  Categorizing a bank feed to UF will reduce the UF balance, not increase it.  To help with this, I'd need to know:

 

1) How did the funds post to UF?  Invoice payment, sales receipt, JE or ???  You can't make a bank deposit into UF, only out of UF.

2) Is the balance positive or negative?

3) Is the balance in UF duplicated in the bank account?  If it's been sitting there since 2020, either the UF entries are duplicates of bank deposits or the bank account is understated by the balance in UF.   

    B
    BBA7Author
    February 9, 2024

    1) How did the funds post to UF? The transactions that posted were "payments". The balance in UF at YE was a debit of about 16K. The balance is still about the same today with the same deposits causing the problem. 

    2) Is the balance positive or negative? It's a Debit balance.

    3) Is the balance in UF duplicated in the bank account?  If it's been sitting there since 2020, either the UF entries are duplicates of bank deposits or the bank account is understated by the balance in UF. I have a telephone appointment with the owner later this morning. I'll add more detail after I talk to him about 2020.

     

    Here's what else I know. The P&L and BS for that year are very spare. Only income no expenses were booked to QB. The 16K that shows as UF is also the total for the Gross Sales for that year, oh boy. 

     

    So it seems to me like I should write off the total Undeposited Funds account in 2023. But How I do that without causing other problems? 

     

    Thank you for your feedback!

    Rainflurry
    Rainflurry
    February 9, 2024

    @BBA7 

     

    You mentioned that for some of the UF balance, there is outstanding A/R for those approximate amounts.  The 'payment' transactions create a UF debit balance which is offset by a credit (reduction) in A/R so all of those payments in UF should have cleared a corresponding amount of A/R. 

     

    I can't imagine the bank account has ever been reconciled if the 2020 financial statements look the way you mentioned.  The balance in UF is from invoice payments so "writing them off" doesn't really make sense unless you know for sure they're duplicate entries.  That income was booked in 2020.  If you determine the bank balance has never been reconciled or is wildly inaccurate, I would deposit the UF balance into the bank account to close it out because I suspect it should have been deposited.  

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