What is the correct way of applying payments to customers account and bank deposits. Our QB balance is like the deposits are doubling in the account. Is that correct?

I have some scenarios to help elaborate some details about applying payments to customers, BK4221.

When you receive bank deposits from your customer, you'll have to link them to an invoice. If this is indeed a check, the steps you've provided when applying the check to the invoice are the correct process. That is you receive the payment from your customer and match them. 

If this is an online payment, you can undo the match. To do this, follow the steps below:

1. Go to the Banking menu, then select Banking.
2. Select the Categorized tab.
3. Locate the payment, then click Undo under the Action column. 
   
   

Then, remove the payment and match them with the online payment. Here's how:

1. Go to Bookkeeping then Transactions then select Bank transactions (Take me there), or go to Banking (Take me there).
2. Select the tile for the account you want to review.
3. Go to the Categorized or Reviewed tab.
4. Select the link in the Added or Matched column to review the transaction.

However, if indeed you really received payments twice, then this is certaintly duplicate. 

In addition, you may need to return customer's money or make a refund out from your customer payment. Learn form this article for your guide: Record A Customer Refund In QuickBooks Online.

Keep me posted if you have any other concerns about recording payments in QuickBooks. I'll always be right here to help.