• Skip to primary navigation
  • Skip to main content

QBGarage.com

The QuickBooks Specialists

  • Home
  • Blog
  • KnowledgeBase
  • Company
  • Show Search
Hide Search
You are here: Home / Archives for undeposited funds

undeposited funds

How Can I Close Transactions With a Customer Who Is Also a Vendor Who Only Paid the Net Balance On an Invoice?

Chief Mechanic · September 13, 2010 ·

For some businesses, another firm is both a customer and a vendor.  If you’ve invoiced that firm (as a customer) while they have billed your company as a vendor, they may opt to pay the net amount owed for simplicity and to preserve their own cash balance.  In that case, you’ll need to find a way to process the net payment and at the same time close both the customer invoice and the vendor bill.

In QuickBooks, there are 2 methods to accomplish this:

  1. Use a clearing Bank account
  2. Use General Journal entries

We favor the second method because it’s more consistent with normal workflow and it more fully documents the transactions recorded.  To mirror Intuit’s own discussion of these methods in their knowledge base article on this topic, we’ll follow their example transaction, where your firm has invoiced a customer/vendor for $100, and that customer/vendor has billed your company $75.  We’ve given this customer/vendor a name, Newco Llc.  QuickBooks doesn’t permit identical names in lists.  For that reason and to better distinguish between the customer account and the vendor account, we’ve appended “(customer)” and “(vendor)” to the company’s name.

Method 1 – Use a Clearing Bank Account

This method involves creation of a clearing account (if you don’t already have one set up) and recording the vendor credit through the Make Deposits function.  Screen shots that illustrate what takes place in important steps follow the description of the steps.

  1. Create a new Bank type account, which in our example is named Clearing Bank Account
  2. Receive the payment from your customer/vendor to pay the customer/vendor’s outstanding invoice in full, which in our example is a payment of $100, and select Undeposited Funds as the Deposit To account if it’s not already set to that by default
  3. Click on the Banking->Make Deposits menu selection and select the payment you recorded in Step 2 in the Payments to Deposit window and click Ok
  4. In the Make Deposits window, add a new line item and enter the customer/vendor’s vendor account in the Received From field, your Accounts Payable account in the From Account field, and the amount of the vendor bill that the customer/vendor deducted from his payment as a negative number, which in our example is -75
  5. Add a second new line item and enter the customer/vendor’s customer account in the Received From field, the bank account to which you’ll deposit the customer/vendor’s net payment, and the amount of the net payment as a negative number, which in our example is -25
  6. Set the Deposit To account to the clearing account created in Step 1, which in our example is the Clearing Bank Account and click Save & Close or Save & New to record the net deposit
  7. Click the Vendors->Pay Bills menu selection and select the customer/vendor’s bill to be paid
  8. Once the bill is selected, click the Set Credits button, choose the vendor credit that you created in Step 4, and click Done to return to the Pay Bills window
  9. Set the Account from which to issue the payment to the clearing account, which in our example is the Clearing Bank Account, and click the Pay Selected Bills button
  10. QuickBooks will display the Payment Summary window, advising you that the bill was paid by a credit only, so it won’t be associated with a bill payment check; click Done to complete paying the vendor bill

In a typical use of the Make Deposits function where there is 1 entry for the deposit amount from Undeposited Funds as a positive number, QuickBooks credits (reduces) Undeposited Funds and debits (increases) the bank account selected in the Deposit To field.  Positive amounts on the Make Deposits window represent credits; negative amounts represent debits.  Thus, Accounts Payable is debited (reduced) by the amount of the vendor bill that the customer/vendor deducted from his payment, and the regular bank account is debited (increased) by the amount of the net payment received from the customer/vendor.  Intuit incorrectly describes the entry made in Step 5 as a credit; it’s not – it’s a negative amount, so it’s a debit.

After completing Step 6 above, you’ve recorded the net amount of the deposit to your regular bank account.  Note that the Deposit Subtotal made to the clearing account is 0.00, reflecting its purpose to serve purely as a clearing account to close transactions.  QuickBooks will not allow setting the From Account to your Undeposited Funds account when recording the net amount being deposited in Step 5.  If you combine this deposit item with others, you’ll complicate reconciling your regular bank account.  That’s why it’s a good idea to make each customer/vendor transaction processed through the clearing account a separate deposit.  The need to separate deposits is one limitation of the clearing account method.

QuickBooks Premier 2009 Clearing Bank Account Make Deposit
QuickBooks Premier 2009 Clearing Bank Account Checking

After selecting the vendor bill in Step 7, you’ll be able to apply the credit that you created in Step 4 by clicking the Set Credits button.

QuickBooks Premier 2009 Clearing Bank Account Pay Bills 1

In the Discounts and Credits window, select the credit.

QuickBooks Premier 2009 Clearing Bank Account Discounts

After selecting the credit, there are no other credits available.  The total of the bills to be paid is 0.00.

QuickBooks Premier 2009 Clearing Bank Account Pay Bills 2

As described in Step 10, QuickBooks will display the Payment Summary window.  However, because the bill was paid entirely by a credit, it won’t be associated with a bill payment check, even one with a zero amount.  The vendor’s balance will be reduced by the amount of the payment and the bill will be marked Paid, but there won’t be a transaction recording the payment in the vendor’s transaction list in Vendor Center.  The fact that the transaction list in Vendor Center presents an incomplete record of what was recorded is another limitation of the clearing account method.

QuickBooks Premier 2009 Clearing Bank Account Payment Summary

Because there’s no bill payment check to delete or void, if you want to undo this process, you’ll need to start by deleting the deposit from the clearing account.  That will leave funds in the Undeposited Funds account and return the vendor bill to an unpaid or open status.

Method 2 – Use General Journal Entries

This method involves making 2 General Journal entries and then processing the customer/vendor’s net payment in your normal workflow.  Screen shots that illustrate what takes place in important steps follow the description of the steps.

  1. Click on the Company->Make General Journal Entries… menu selection and record a debit (decrease) to Accounts Payable for the amount of the vendor bill that the vendor/customer deducted from his payment, which in our case is $75; in the Name field for the debit, enter the vendor account name
  2. On the same General Journal entry, enter a credit for an equal amount to another account, such as the expense account used on the vendor bill, and click the Save & New button
  3. Enter a second General Journal entry with a credit for $75 to Accounts Receivable, and in the Name field for the credit, enter the customer account name
  4. On the same General Journal entry, enter a debit for $75 to the same account you used in Step 2 and click the Save & Close button
  5. Click on the Customers->Receive Payments menu selection and enter the customer account name in the Received From field; after doing so, you’ll see the message that this customer has available credits
  6. Click the Discounts & Credits… button to apply these credits
  7. In the Discounts & Credits window that appears, select the credit for $75 that you recorded in Step 3 and click the Done button to return to the Receive Payments window
  8. Select the customer invoice being paid and enter the net amount paid by the customer/vendor, along with other payment information such as the Pmt. Method and Check #
  9. Click Save & Close or Save & New to record the customer payment

The account you enter in Steps 2 and 4 doesn’t matter as long as it’s the same account, because the debits and credits reverse each other.  In fact, if you already have a clearing account set up, you can simply use that clearing account in these steps.  These 2 General Journal entries are an effort to post a debit to Accounts Payable and a credit to Accounts Receivable.  Because QuickBooks imposes a restriction that only 1 Accounts Payable or Accounts Receivable account can appear on a General Journal entry, it’s necessary to make 2 entries.

Here are the 2 General Journal entries:

QuickBooks Premier 2009 Vendor Customer 1
QuickBooks Premier 2009 Vendor Customer 2

Here’s the process at Step 5:

QuickBooks Premier 2009 Vendor Customer 3
QuickBooks Premier 2009 Vendor Customer 4

And finally, here’s our completed Receive Payments screen just before saving the transaction:

QuickBooks Premier 2009 Vendor Customer 5

We favor the second method – using General Journal entries – for 2 reasons.  First, after completing these steps, you can process the customer/vendor’s check with other checks in your Undeposited Funds account as you normally would.  You won’t need to make a separate deposit for each payment from a customer/vendor in order to maintain your bank reconciliation process as you would if you used the clearing account method.  Second, because General Journal entries appear on the transaction list in both the Customer Center and Vendor Center, you’ll have a well-documented trail of what took place.  On the vendor account, you’ll see a bill for $75 and a General Journal debit for $75 that pays the bill; on the customer account, you’ll see the $100 invoice, the $75 General Journal credit that reduced the amount owed, and the $25 payment.  In contrast, in the clearing account method, you’ll only see the vendor bill marked Paid.  You won’t see the transaction that actually paid the vendor bill, which can lead to confusion after the details of how the transaction was recorded are forgotten.

Vote This Post DownVote This Post Up (+2 rating, 2 votes)
Loading...

How Can I Use Reports To Assist Rebuilding a Damaged Company File?

Chief Mechanic · September 5, 2010 ·

QuickBooks reports can be a valuable complement to the process of rebuilding a damaged company file (.qbw).  After running the Rebuild Data utility, Intuit recommends that you proceed through these steps in the order listed to identify data damage that the rebuilding process repaired and to confirm that further data problems don’t exist.

1.  Examine the Uncategorized Expenses account for damaged transactions.  During the rebuild process, QuickBooks may put some transactions into this account as a way of restoring balance to your financial records.  Under normal circumstances, the only transactions that should be in this account are voided checks.  Look for transactions that don’t have an amount or account associated with them.  You’ll need to delete these transactions and re-enter them with the correct amount and account.  The Uncategorized Expenses account is created automatically by QuickBooks.  If you’ve never produced an event that would have automatically created this account, you won’t see it in your chart of accounts.  The simplest way to examine the Uncategorized Expenses account is to open the Chart of Accounts window by clicking on the Company->Chart of Accounts menu selection (or use the keyboard shortcut Ctrl + a).  Locate the Uncategorized Expenses account (if it exists) and double-click on it to produce a QuickReport.  Change the Dates filter to All to include all entries in the account.  The transactions reported (other than voided checks) will require attention.

Here’s a screenshot of the Uncategorized Expenses account in the Chart of Accounts list.

QuickBooks Premier 2009 GL Uncategorized Expenses

2.  Examine the Uncategorized Income account for damaged transactions.  Just like the behavior of the Uncategorized Expeses account, QuickBooks may put some transactions into this account during the rebuild process as a way of restoring balance to your financial records.  Review this account for transactions that are missing amounts or for transactions that are linked to the wrong account.  You’ll need to delete these transactions and re-enter them with the correct amount and account.

Here’s a screenshot of the Uncategorized Income account in the Chart of Accounts list.

QuickBooks Premier 2009 GL Uncategorized Income

3.  Verify that total debits less total credits equals the balance in the Undeposited Funds account.  To do this, run a Custom Transaction Detail Report (Reports->Custom Transaction Detail Report).  Be sure to include All dates from the Dates pull-down menu; click the Modify Report… button and choose the Filters tab.  On the Account pull-down menu, choose only the Undeposited Funds account.

4.  Compare the total in the Open Invoices report (Reports->Customer & Receivables->Open Invoices) to the A/R balance shown on a Balance Sheet (Reports->Company & Financial->Balance Sheet Summary) and make sure they match.  Make sure that the Dates filter for the Open Invoices report is set to Today and that your balance sheet Dates filter is set to All.  If your balance sheet filter is not set to All and you have entered customer payments after the balance sheet date, you’ll see a difference between the amounts on these 2 reports.  That difference doesn’t indicate a data problem. You can also check the current A/R balance in the Chart of Accounts window (Company->Chart of Accounts).

Here’s a screenshot of the 2 reports side by side where the A/R balances shown on the reports match perfectly.

Report Rebuild Compare Open Invoices To Balance Sheet

5.  Compare the total in the Unpaid Bills Detail report (Reports->Vendors & Payables->Unpaid Bills Detail) to the A/P Balance shown on a Balance Sheet (Reports->Company & Financial->Balance Sheet Summary) and make sure they match.  Make sure that the Dates filter for the Unpaid Bills Detail report is set to Today and that your balance sheet Dates filter is set to All.  If your balance sheet filter is not set to All and you have paid bills after the balance sheet date, you’ll see a difference between the amounts on these 2 reports.  That difference doesn’t indicate a data problem.  You can also check the current A/P balance in the Chart of Accounts window (Company->Chart of Accounts).

Here’s a screenshot of the 2 reports side by side where the A/P balances shown on the reports match perfectly.

Report Rebuild Compare Unpaid Bills To Balance Sheet

6.  Verify that ASSETS = LIABILITIES + EQUITY on both an accrual and cash basis balance sheet.   Produce a Balance Sheet Detail report (Reports->Company & Financial->Balance Sheet Detail) and confirm that Total Assets = Total Liabilities + Equity.  Note that Total Liabilities itself is the sum of Total Current Liabilities and Non-current Liabilities.  The balance sheet example shown below doesn’t include any Non-current Liabilities, and to reduce image size we’ve reproduced a Balance Sheet Summary report, rather than a detail report.

Here’s a screenshot of a Summary Balance Sheet where accounts are in balance:

Report Summary Balance Sheet

You need to verify that both accrual and cash basis balance sheets are in balance.  To change the report basis, click the Modify Report… button.  On the Display tab, select either Accrual or Cash as your Report Basis.

QuickBooks Premier 2009 Modify Report Basis

If either or both of these reports are out of balance, there are further troubleshooting steps to follow depending on which report (either the cash or accrual basis report) is out of balance.

See our related articles for more information on troubleshooting out-of-balance accrual basis balance sheets and rebuilding a company file.

For more information using the reporting function in QuickBooks to assist rebuilding a damaged company file, consult this Intuit knowledge base article.

Vote This Post DownVote This Post Up (No Ratings Yet)
Loading...

How Do I Reduce the Cash In My Cash Drawer To Deposit the Funds In My Bank Account?

Chief Mechanic · August 28, 2010 ·

To reduce the amount of cash in your cash drawer and deposit the funds in your bank account, you need to record a cash drawer payout.

If you have POS integrated with QuickBooks financial software, it’s valuable to understand how cash in a cash drawer is accounted for in QuickBooks. Cash payments from customers are recorded in the Cash in Drawer which is connected to a balance sheet bank account in QuickBooks. When you update QuickBooks financial software by clicking on the Financial->Update QuickBooks menu selection, cash transactions are recorded in the balance sheet bank account you specify in your POS company preferences. To verify this setting, click on the Advanced tab of the Financial->Accounts sub-menu on the Edit->Preferences->Company menu selection.

By default, POS sets this balance sheet bank account to Cash in Drawer, as shown in the screenshot below.

QuickBooks POS 8 Company Preferences Cash In Drawer

If you need to change this account setting, choose a valid QuickBooks bank account and save your change by clicking the Save button.

Reducing the amount of money in your cash drawer by recording a payout will:

  • reduce the balance of the balance sheet bank account recorded for that preference by entering a credit to that account
  • enter an equal, offsetting debit to an account you specify when you record the payout

To prepare to deposit funds from a cash drawer into your bank account, you’ll normally choose to debit your Undeposited Funds account, provided you are have the Use Undeposited Funds as a default deposit to account preference turned on in QuickBooks. If you don’t have that preference turned on (which we do not recommend), you’ll choose to debit the bank account into which you’ll deposit the funds from the cash drawer. See our related article for more information on the purpose of the Undeposited Funds account.

For the remainder of this discussion, we’ll assume that the Use Undeposited Funds as a default deposit to account preference is turned on in QuickBooks, and that you’re using the default balance sheet account, Cash in Drawer.

To record the payout, click on the Point of Sale->New Payout menu selection. Enter the Cashier, the Amount (which is the amount you are removing from the cash drawer to deposit into your bank account), and Comments. Choose Undeposited Funds from the Account list and click Ok.

QuickBooks POS 8 Cash Payout Undeposited Funds

When you next update QuickBooks financial software from POS, your balance sheet account Cash in Drawer will have been reduced by a debit in the amount you recorded as a payout, and Undeposited Funds will be increased by a debit in that same amount.

Click on the Banking->Make Deposits menu selection to actually include this cash on a regular bank deposit.

Vote This Post DownVote This Post Up (No Ratings Yet)
Loading...

What Are Special Account Types?

Chief Mechanic · August 23, 2010 ·

QuickBooks maintains approximately 13 different Special Account Types. These types are assigned to individual accounts in a company’s chart of accounts. The assignment of a Special Account Type to an account permits that account to carry out a special function.

  1. AccountsReceivable
  2. UndepositedFunds
  3. InventoryAssets
  4. AccountsPayable
  5. PayrollLiabilities
  6. OpeningBalanceEquity
  7. RetainedEarnings
  8. UncategorizedIncome
  9. CostOfGoodsSold
  10. PayrollExpenses
  11. UncategorizedExpenses
  12. Estimates
  13. PurchaseOrders

Special Account Types and the assignment of those types to accounts are not visible to a typical QuickBooks user.

However, a typical user can determine which account is assigned a Special Account Type by recording a transaction that should impact the balance of an account functioning as an account with a Special Account Type and tracking which account balance was affected. For example, an expense transaction of $100 in the prior year should impact the account functioning as RetainedEarnings. Be sure to delete these test transactions once you’ve completed your testing.

It’s important to understand that an account’s Special Account Type is independent of its name. That is, an account can be named Undeposited Funds but not have a Special Account Type of UndepositedFunds. This situation typically occurs if accounts were renamed and preferences changed over time. If QuickBooks creates a new account that’s a Special Account Type and the default QuickBooks name is already in use, it will place an asterix at the start of the account name, as in *Undeposited Funds. If you observe accounts that start with an asterix, it’s likely that these accounts are the actual accounts assigned Special Account Types.

Vote This Post DownVote This Post Up (+1 rating, 1 votes)
Loading...

What Are Payment Methods?

Chief Mechanic · August 23, 2010 ·

As the name suggests, Payment Methods are a list of the ways by which a customer can make a payment. They’re maintained on the Lists->Customer & Vendor Profile Lists->Payment Methods menu selection as 1 of 9 profile lists for Customers & Vendors. This particular profile list is only used for Customers.

QuickBooks Enterprise Solutions 10 Payment Methods

A Payment Method can be one of 11 pre-defined Payment Types:

  1. Cash
  2. Check
  3. American Express
  4. Discover
  5. MasterCard
  6. Visa
  7. Other credit card
  8. Other
  9. Debit Card
  10. Gift Card
  11. E-Check

These Payment Types are part of the QuickBooks program itself and can’t be maintained by a user.

The Customer’s Payment Method is specified on the Receive Payments and the Enter Sales Receipts windows, and payments are grouped by Payment Method on the Payments to Deposit window if you’ve opted to use the Undeposited Funds account.

If you have a lot of payments to deposit, you can opt to the filter the items on the Payments to Deposit window to only include 1 particular Payment Method. Therefore, you should create Payment Methods that match the way your customer payments are grouped into deposits.

QuickBooks Enterprise Solutions 10 Make Deposit Payment Methods

You can also specify a customer’s Preferred Payment Method on the Payment Info tab of the Edit Customer window.

QuickBooks Enterprise Solutions 10 Customer Preferred Payment Method

Payment Methods primarily serve the function of grouping related items on a deposit, so your firm’s approach to bank deposits should drive the methods you create and maintain on this list.

Vote This Post DownVote This Post Up (+1 rating, 1 votes)
Loading...
  • Go to page 1
  • Go to page 2
  • Go to Next Page »

Accounting

  • Financial Accounting Standards Board

Developer

  • Intuit Developer Network Forums
  • qbXML Onscreen Reference

Intuit

  • Enterprise Solutions
  • Intuit
  • Intuit Marketplace
  • QuickBooks
  • QuickBooks Online Community

QBGarage.com

Copyright © 2008–2021 QBGarage.com · Privacy · Terms & Conditions · Site Help