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Undeposited Funds
Undeposited Funds is the QuickBooks holding account where invoice payments and sales receipts wait until you combine them into a bank deposit that matches the real deposit slip. It is not a bank account: it should empty each time you deposit, and a lingering balance means payments were recorded but never cleared to the bank.
Last reviewed October 2026
Why it matters
Undeposited Funds
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A worked example: $1,250.00 of received payments is held in Undeposited Funds, then grouped into one bank deposit of $1,250.00 that matches the real deposit slip; once it posts, Undeposited Funds empties out to 0.00 and clears. Illustrative figures.
Undeposited Funds is the tray your received payments sit in before you take them to the bank. Record a customer payment and QuickBooks holds it here until you group it into a deposit.
That grouping is what lets one bank deposit line up against several customer payments on the statement. Used that way, the account empties every time you make a deposit. Left unmanaged, it fills with payments that were recorded but never deposited — and cash on the books drifts away from cash at the bank.
The two-step deposit flow
QuickBooks records incoming money in two steps: a received payment that closes the customer's invoice, and a separate bank deposit that moves the money into the bank account. Undeposited Funds is the holding account between them.
The split exists because of how banks report deposits. Take three checks to the bank on one slip and the statement shows a single deposit for the combined total — one line, not three. If each customer payment posted straight to the bank account in the books, the register would show three small amounts where the statement shows one, and the account would never reconcile cleanly. The two-step flow solves this: payments wait in the holding account, then the deposit step groups exactly the payments that went to the bank together into one recorded deposit that matches the statement line. Step one gives the customer credit for paying; step two makes the bank account in the books match the bank. Skip step two and the flow stops halfway — which is precisely what a lingering balance is.
Where QuickBooks sends payments by default
Intuit describes the account as one that “holds invoice payments and sales receipts you want to combine before taking them to the bank” (Intuit: what's the Undeposited Funds account, checked October 2026). In QuickBooks Online the choice is made on each transaction: the Deposit to field on a received payment or a sales receipt either names Undeposited Funds or names a bank account directly. Payments taken through QuickBooks Payments are moved for you, and Intuit notes you only need the account when you take more than one payment to the bank at once or your bank isn't connected to QuickBooks. The account can also be renamed, so if you can't find it, check the Detail type column of the chart of accounts for “Undeposited Funds” (Intuit: deposit payments into Undeposited Funds in QuickBooks Online, checked October 2026).
In QuickBooks Desktop, sales receipts go to Undeposited Funds by default. The setting lives under Edit → Preferences → Payments → Company Preferences, in the box labeled “Use Undeposited Funds as a default deposit to account” (Intuit: deposit payments into Undeposited Funds in QuickBooks Desktop, checked October 2026). Turning it off doesn't clear anything already waiting; it only changes where new payments go, which is why Intuit's tip is to always review the Deposit to field before you save.
How an Undeposited Funds balance builds
An Undeposited Funds balance builds when payments are received but the deposit step never happens — or happens outside the flow, so the money reaches the bank in the books while the waiting payments are never cleared.
The most common version comes from the bank feed. The real deposit shows up in the feed and, instead of being matched to the waiting payments, it is added as brand-new income. Now the same money is recorded twice — once as the invoice payment, once as the feed deposit — revenue is overstated, and the original payments sit in the holding account indefinitely. Reading the account tells you how long this has been happening: open its register or a transaction report, sort oldest first, and every entry older than your most recent real bank deposit is a payment that was recorded but never properly cleared. A balance that has built for months or years is untangled payment by payment — that is our Undeposited Funds fix, which clears the buildup and removes the duplicated income without disturbing what the bank has already confirmed.
The other causes are quieter, and each leaves its own trace in the register:
- Deposits entered straight to the bank. Someone recorded the bank deposit by hand against an income account, so the payments that money belonged to never left the holding account.
- The same money recorded in two places. A payment sits in Undeposited Funds while a separate deposit for the same money is already in the bank register.
- One sale entered two ways. An invoice with a payment and a sales receipt for the same sale, so one of them is a duplicate.
- Refunds issued from the holding account. They leave negative lines that can't be deposited on their own.
- Payments that never arrived. An invoice marked paid for a check that bounced, was lost, or was never received.
How Undeposited Funds clears
Undeposited Funds clears when you record the bank deposits that should have grouped its payments: open the deposit screen, select the payments that went to the bank together, and record a deposit that matches the real slip — same date, same total.
Each deposit moves its payments out of Undeposited Funds and into the bank account, and the holding balance falls toward zero. If the account has years of buildup, a free QuickBooks review will show how much of your recorded income is really stuck there.
A stale Undeposited Funds balance is one of the first things we look for in a review — and clearing it is part of any cleanup we quote: recorded deposits matched to real bank slips until the holding account returns to zero.
Clearing it yourself, step by step
The QuickBooks Online steps below follow Intuit's help on recording bank deposits and fixing duplicate transactions (Intuit: record and make bank deposits in QuickBooks Online and Intuit: fix duplicate transactions, both checked October 2026). Work them in this order — the order is what keeps you from deleting income that really happened.
- Reconcile the bank account first. Until the register ties to the statement, you can't tell which deposits truly arrived. Once it does, every deposit on the statement is a fixed point to match the waiting payments against; the method is in the bank reconciliation doc.
- List what is waiting. Open the Undeposited Funds register (All apps → Accounting → Chart of accounts, then View register), sort oldest first, and note every payment older than your latest real deposit.
- Record the deposits that really happened. Select + Create → Bank deposit (+ New in some files), choose the bank account from the Account dropdown, tick the payments that were on one deposit slip, confirm the total matches the slip and the statement line, then select Save and close. Make one recorded deposit per slip. In Desktop, select Record Deposits / Make Deposits on the Home page, tick the payments in the Payments to Deposit window, then choose the Deposit to account and the date the money reached the bank.
- Undo bank-feed deposits that were added as income. Go to All apps → Accounting → Bank transactions, open the Categorized tab (it may be labeled Posted), select the link in the Added or Matched column and select Undo. The deposit goes back to For review, where you match it to the waiting payments or the deposit you recorded — using Find match if QuickBooks doesn't suggest the right one. Intuit's fix for an invoice payment plus an added deposit is exactly this: undo the added deposit and match it to the payment.
- Fix money recorded in two places. When a payment waits in Undeposited Funds and a separate deposit for the same money is already in the bank, keep the payment, add it to the bank deposit that matches the statement, and delete the extra deposit that no longer matches — the order Intuit gives for this case.
- Edit, don't delete, a misrouted payment. A payment saved to the wrong account doesn't appear on the deposit screen. Open it from All apps → Sales & Get Paid → Sales transactions, change Deposit to to Undeposited Funds and save. A blue date link beside the customer's name means it is already on a deposit; open that deposit and untick it. Delete only a true duplicate: for an invoice and a sales receipt recorded for the same sale, Intuit's rule is to keep the one with the payment attached and delete the other.
- Clear negative entries with a zero deposit. A refund issued from Undeposited Funds leaves a negative line that can't be deposited by itself. Intuit's method is a journal entry for the same amount — Undeposited Funds on the debit line, the bank on the credit line — followed by a bank deposit that combines the negative item and the journal entry so the total is zero (Intuit: resolve negative entries from Undeposited Funds, checked October 2026).
- Find out why an old payment will never match. A payment recorded for money that never arrived should be removed, and the invoice it closed reviewed with the customer; a payment whose money reached the books through an added feed deposit is step 4. A journal entry that simply credits Undeposited Funds makes the balance sheet look right, but it doesn't remove the old payments — Intuit notes that every transaction in Undeposited Funds appears in the Bank Deposit window — so they, and the journal entry, keep sitting on the deposit screen until they are combined into a deposit or corrected at the source.
Stop if the old items sit in periods that were already reconciled or reported on a tax return: changing them moves balances a preparer has already relied on. That is the point where the clearing becomes our done-for-you Undeposited Funds cleanup, and where duplicated income usually turns up alongside it.
Where this shows up
- Bank reconciliationUndeposited Funds clears when its payments are grouped into a deposit that matches the bank — the heart of reconciliation.See the service
- Problem: income looks higher than the cash you bankedA stale Undeposited Funds balance records payments that never reached the bank, so revenue reads high against the statement.
Questions about Undeposited Funds
Why is there a balance in Undeposited Funds?
Because payments were received and recorded but never grouped into a bank deposit. Until you record the deposit that moves them to the bank, they sit in the holding account, and that balance overstates cash on hand and can overstate income.
How do I clear Undeposited Funds?
Record a bank deposit that groups the received payments to match the real deposit slip. In QuickBooks Online that is + Create, then Bank deposit: choose the bank account, tick the payments that went to the bank together, and check the total matches the slip. In Desktop, use Record Deposits on the Home page. Each deposit moves those payments into the bank account, and the holding balance falls back toward zero.
Should Undeposited Funds be zero?
Between deposits it can briefly hold payments you have received but not yet taken to the bank. What it should not do is carry a stale balance month after month — that is the sign payments were recorded but never cleared to the bank.
Does Undeposited Funds affect my income?
It can. If payments are entered against invoices and then never deposited, revenue can be recorded while the matching cash never reaches the bank, so the books show income the bank balance never confirms.
Can I clear Undeposited Funds with a journal entry?
A journal entry fixes the balance, not the list. Crediting Undeposited Funds lowers the balance on the balance sheet, but the old payments still appear on the Bank Deposit screen, and the journal entry joins them there. Intuit's own method for a stuck negative item combines it with a journal entry in a deposit that totals zero, which clears both. For ordinary old payments, fix the payment or the duplicate deposit instead.
Why is a payment missing from the Bank Deposit screen?
Usually because it was saved to another account, or it is already on an earlier deposit. Open the payment and check its Deposit to field; if it names a bank account, change it to Undeposited Funds. If a blue date link appears beside the customer's name, the payment is already linked to a deposit, so open that deposit and untick it to free the payment.
Do I have to use Undeposited Funds?
No. Intuit says you only need it when you take more than one payment to the bank in a single deposit, or when your bank isn't connected to QuickBooks. If every payment reaches the bank on its own, recording it straight to the bank account is fine. Just don't do both for the same money.
Should I delete old payments stuck in Undeposited Funds?
Only true duplicates. Most stuck payments are real income whose deposit reached the books another way, usually a bank-feed deposit added as new income. Deleting the payment would remove the record that the customer paid; the fix is to undo the added deposit and match it to the waiting payment.
Why can't I find Undeposited Funds in my chart of accounts?
It may have been renamed. Intuit notes the account can be renamed, so look in the Detail type column of the chart of accounts for Undeposited Funds.
- Cash vs accrual— how the basis affects when these receipts count
- Cost of goods sold— what those sales cost, recorded beside the receipts