Undeposited Funds Window
Many first time users of QuickBooks are confused by 'Undeposited funds', so why should you be any different. I always tell my new QuickBooks users that Undeposited funds is like a drawer that holds your cash and checks till you are ready to take them to the bank and post them into the QuickBooks Bank Register. So let's look at the process of using Undeposited funds.
If you are using QuickBooks Invoices to record your sales, be sure to use Receive Payments to apply the payment against the invoice. Don’t make the mistake of skipping this important step, because if you go straight to the Make Deposits screen, the invoice won’t show as paid, and you might just record your income twice.
By default, QuickBooks automatically selects “Group with other Undeposited funds” as the account for posting payments you receive. The Undeposited funds account acts like a holding account so that you can record deposits in your QuickBooks Bank Register that actually match the physical deposits you make at your bank. If QuickBooks didn’t use the Undeposited funds account, each payment receipt would be posted individually in your Check Register even if you frequently posted several payments on a single deposit slip at the bank; this would make it very difficult to reconcile your bank account at the end of the month.
By selecting (with a check mark) the payments you actually want to deposit from the Payments to Deposit window, you are clearing those payments from Undeposited funds and posting them to your Bank Account, keeping everything in balance and the accounting straight.