The Undeposited Funds account is a holding account, similar to holding money in a drawer until you make a deposit to your financial institution. When you receive customer payments, use a payment item on an invoice, or enter a sales receipt, the funds are held until you are ready to make a deposit in QuickBooks.
Note: If you are not using accounts receivable functions such as invoices and payments, or if you take individual payments to your financial institution (rather than a batch of payments), you can bypass the Undeposited Funds account by using the Make Deposits window (found on the QuickBooks Banking menu). For more information about making deposits, please see the QuickBooks Help topic Depositing customer payments.
Functions of the Undeposited Funds account:
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