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How to Fix Errors in Undeposited Funds in Quickbooks 2018



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Matt Hulk was here with the quickbooks

university hey i want to do go through

and show you how to fix errors in your

undeposited funds account I get this

question quite a bit you know somebody

takes over the accounting the QuickBooks

for you know a previous person or you

know a business owner has all these

hanging items in undeposited funds and

they want to know how to fix it okay so

what I'm going to do in this video is

walk you through how to fix that for the

current year okay if you have prior year

undeposited funds amounts this could be

done differently mainly because you

don't want to necessarily go back and

change prior years if the tax returns

have been filed and it depends on the

amounts so there's some judgment

involved so that's gonna require kind of

a different level of thinking okay so

first what I want to do is go through

just a quick little I put this together

here just the process in QuickBooks okay

so you invoice your customer and then

you receive your customer payment and

when you receive that payment most times

and I'll show you why I say most that

money goes to what's called undeposited

funds in QuickBooks and then you deposit

that money to the bank it comes out of

undeposited funds and goes to your

checking savings whatever the bank

account is okay this is where most

errors occur all right is that step

between undeposited funds and deposit to

bank all right so what you have to first

do in your QuickBooks file is go to your

preferences okay so if we go to edit we

go to preferences okay and we go to this

payments option here and go to company

preferences you're gonna see an option

here that says use undeposited funds as

a default deposit to account that means

that every time you receive a payment

from a customer that payment is going to

go to this undeposited funds account and

the theory being that you're going to

of payments throughout the week let's

say or for a few days

and you're not going to the bank

immediately so QuickBooks doesn't want

you to show that money as if it's in

your checking account when it really

isn't alright so when you do physically

go to the bank you would move it from

undeposited funds to the checking

account all right so if you don't want

to do this and every time you receive a

customer payment you have it deposit to

the checking account or whatever account

you can uncheck this box but most times

that's going to be checked it's kind of

a safety net essentially so you don't

overstate your bank balances all right

so let's it hit OK alright so let's take

an example here let's say that we

receive a payment from a customer and we

go to customers we say receive payments

and we're going to say Cristie

Abercrombie bathroom remodel all right

so she has two of them here and this one

is four thousand five twenty two so

let's say that she makes a two thousand

dollar payment on that all right and we

say it's a check and we put in the check

number all right and it'll show two

thousand dollar payment and we hit save

and close all right so what happened to

that okay so that amount that two

thousand dollars went to this

undeposited funds account so when we go

to the bank we go to banking make

deposits and you're gonna see that the

two thousand dollar payment here is

showing in undeposited funds so if we're

going to the bank and we say here's the

two thousand dollars we're going to make

this deposit in QuickBooks and we hit

save close okay now we're gonna see that

it's going to show up in our checking

account all right I think this was right

here twelve fifteen two thousand dollars

and you'll see that it came from

undeposited fonts all right now if you

don't do the undeposited funds step

we'll just go to your checking account

all right so where do the errors occur

well they can occur in a couple of a

couple of different places okay so let's

go back up here and we say customers

let's say we follow this process we say

receive payments and we say again this

is Krusty Abercrombie remodel bathroom

and she pays the rest of the 25:22 okay

so we say 25:22 check number five two

four one and we hit it's applied to that

invoice we hit save and close okay so

now let's say that we're going to the

bank later in the week and we don't

follow the process of receiving payments

all right

so instead we just go to our you know

checking account register and we just

say this is a deposit from Christie

Abercrombie and we're gonna say that

it's twenty five twenty two and we're

going to say what was this for well most

people will just go through and say okay

well this was for you know whatever they

think it's for okay design income all

right and they record it okay so we have

a deposit here of twenty five twenty two

in the check register because we went

and made that deposit but if we didn't

follow the step of banking and make

deposits and check this off it's just

going to stay there all right it's not

going to go anywhere okay so so what

happens in this situation okay well what

essentially is happening is that you are

double counting that income alright so

in the first case when you recorded that

original invoice for 4522 you put it to

certain items and you recorded revenue

in your profit and loss well when we

just recorded that deposit for two

thousand five hundred and twenty to go

to my check register here

we put that again to another revenue

item design income so now we are double

counting our revenue okay and this is a

big problem okay so what often happens

when you have these items that are

hanging out in undeposited funds is that

revenue has been double counted okay so

unfortunately the best way to fix this

is you are gonna have to go through each

of your undeposited funds amounts and

again this is why I say if it's for this

year it's gonna make it a little bit

simpler hopefully and you're gonna have

to go through each one of these and

match up where that deposit might be in

your check register all right

so if the 25:22 came in you're gonna

have to go to the check register and I

always tell people you're gonna have to

void this deposit okay I don't like

deleting I just like to void that way we

have a record of it if we say void

deposit hit record okay and then go to

banking make deposits okay let me close

this so the screen comes back up then

make that deposit all right so what do

you do if this happened in a previous

Bank period that you have already

reconciled well you're gonna have to go

back and unreconciled at statement that

month for the checking account and re

reconcile it okay and the issue is your

if you do not get this out of

undeposited funds and you do reconcile

you'll be able to reconcile for that

month and that money will still be

hanging out in that undeposited funds

account so if it's for a previous month

during the current year you're gonna

have to unreconciled

record the deposit correctly and then

reer eken saw the account so it will

take some investigation some work for

you to figure out you know where the

issue is so that you can go back and fix

it

all right so we can get a little bit

complicated but it's doable you just got

to figure out where those amounts are

coming from and how they got recorded

incorrectly in the first place and

you'll be on your way to fixing it if

you have any questions reach out to me

and head on over for full QuickBooks

training at QuickBooks University that's

cubie University dot o-r-g

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