--- title: "What Are Undeposited Funds? Definition & Example | MCC" description: "A QuickBooks holding account for payments received but not yet deposited. A worked example, how it differs from a clearing account and common mistakes." url: "https://mcc-solutionsnj.com/bookkeeping/glossary/undeposited-funds" --- Bookkeeping glossary # What are undeposited funds? A QuickBooks holding account for payments received but not yet deposited. By [Matthew Coleman](/about), MCC Solutions [![Intuit ProAdvisor Gold tier badge](/img/credentials/intuit-proadvisor-gold.png)](https://proadvisor.intuit.com/app/accountant/search?searchId=matthew-coleman77)Gold tier in Intuit's ProAdvisor program. [See my Intuit listing](https://proadvisor.intuit.com/app/accountant/search?searchId=matthew-coleman77) Keeping your own books? Tallyfinch does invoices, bank import and reports on your computer. [See Tallyfinch](/bookkeeping/mcc-books-downloadable-bookkeeping-software) ## In plain English Group payments into one deposit that matches the bank. The balance should return to near zero. Want a second pair of eyes on your books? [A free bookkeeping health check](/bookkeeping/health-check). Processor fees go in the same deposit as a negative line. ## Why it matters Undeposited funds exists so that several customer payments can be grouped into the single deposit that appears on your bank statement. When it is used wrongly, payments pile up in this account and never reach the bank account in the books. The result is a bank reconciliation that will not balance and income that may be recorded twice. A balance that keeps growing usually means deposits were entered separately instead of from the received payments. ## Worked example Five payments totaling $865, less $25.50 fees, make an $839.50 deposit. ## How to handle it - When recording a customer payment, send it to undeposited funds if it will be combined with others in one bank deposit. - When the bank deposit appears, create a deposit that selects those payments so the total matches the bank. - Add processor fees as a negative line within the same deposit. - Review the undeposited funds balance each month; it should contain only payments not yet in the bank. ## Common mistakes - Recording the bank deposit as new income instead of selecting the payments waiting in undeposited funds, which counts the sales twice. - Leaving old payments in the account for months, which overstates cash on the balance sheet. - Deleting stale items without checking whether they were ever deposited, which can remove real sales. ## Not the same as: Clearing account Undeposited funds is a specific QuickBooks holding account for received payments waiting to be deposited. A clearing account is a general term for any temporary account used to route transactions before they reach their final place. [See Clearing account](/bookkeeping/glossary/clearing-account). ## Go deeper - [Undeposited Funds in QuickBooks Explained](/bookkeeping/guides/quickbooks-undeposited-funds-explained): Why customer payments land in Undeposited Funds, how to group them into bank deposits, and how to fix a balance that will not clear. ## Related terms - [Working capital](/bookkeeping/glossary/working-capital): Current assets minus current liabilities, a rough measure of short-term cushion. - [Write-off](/bookkeeping/glossary/write-off): Removing an amount from the books because it will not be collected or has no value. - [Trial balance](/bookkeeping/glossary/trial-balance): A list of all account balances at a date, used to check that debits equal credits. ## Common questions **What are undeposited funds?** A QuickBooks holding account for payments received but not yet deposited. **Can you give an example of undeposited funds?** Five payments totaling $865, less $25.50 fees, make an $839.50 deposit. **Why is my undeposited funds balance so large?** Usually bank deposits were downloaded and matched to income accounts instead of to the payments waiting there. The fix is to match each deposit to its payments and remove any duplicate income. **Do I have to use undeposited funds?** Not always. If each payment arrives in the bank as its own deposit, you can record it straight to the bank account. The account is most useful when several payments land together. General information, not tax, legal or accounting advice. Confirm rules with the IRS, the NJ Division of Taxation or a licensed professional. Need help? [### Monthly bookkeeping Categorizing, reconciling and monthly reports, with cleanup, payroll and NJ filings available. Bookkeeping →](/bookkeeping/) [Full glossary](/bookkeeping/glossary) Do it yourself ### Solopreneur Money Toolkit Estimate the tax, compare the offer, keep the calendar and run the business from one organized set of files. 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