LeanLaw introduced the option to deposit trust paid invoice payments & deposits into undeposited funds instead of the operating or IOLTA bank accounts. So, why use undeposited funds vs. depositing directly into your bank account. Let's allow Intuit to explain.
Think of the Undeposited Funds account as an envelope where you keep checks until you take them to the bank.
If you receive more than one check or payment in a day, you may want to group them all into one deposit. You want to enter those transactions so that your Quickbooks Online Bank Register matches your Bank's monthly statement.
When you are ready to record a payment:
- Choose Undeposited Funds for the Deposit to account instead of a Bank account.
- When you have all the payments entered and you are ready to actually deposit them in your bank, use Bank Deposits which is found under the Plus (+) Sign Icon at the top of QuickBooks Online.
- In the Bank Deposits screen, at the top left, you can select which bank account you'd like to deposit to.
- Select the appropriate Date at the top left.
- If you have location tracking turned on you can select a Location.
- You will see a Payments section. The payments listed are the ones you recorded and marked to go to Undeposited Funds. You can now select which of these payments you'd like to include in this deposit for the day. Note: These will be listed in the order the payments were received and not by the date the payment was due.
- Click Save.
Because we are trying to replicate in your QuickBooks Online Company what you're actually doing daily, then when your bank statement arrives, the amount of the deposit matches the deposit in your QuickBooks Online bank register.
Note: Certain reports or registers may show the deposited amount listed under Undeposited Funds, which, is used to denote the last account the funds were in before being deposited. To see what funds are sitting in Undeposited Funds that have not yet been deposited to the bank account, go to your Bank Deposits to see the Undeposited Funds account via your Balance Sheet from the Reports menu.