How to Clear Undeposited Funds from QuickBooks and QuickBooks Desktop?

Clear Undeposited Funds in QuickBooks

Undeposited funds in QuickBooks are the ones you accept from your clients/customers. They can be received via checks or sale receipts. Their total amount needs to be entered in the Undeposited Funds Account in QuickBooks. When deposits are made in a bank and the entries for the same are entered in the software, the same amount needs to be cleared from the Undeposited Funds Account. You can understand how to clear undeposited funds in QuickBooks through the Remove and Record method. In this method, uncategorized funds are removed from an Undeposited Account. The Dummy Bank Account method can also help you in removing these funds in QuickBooks Online and QuickBooks Desktop.

What are Undeposited Funds in QuickBooks?

There is an account for undeposited funds in QuickBooks. This account holds all the payment details of your clients/customers. When a payment is made through a check or sale receipt, the amount detail is entered into the account. This can be understood as undeposited funds in QuickBooks.

Work of Undeposited Funds in QuickBooks

Here, we have explained how undeposited funds or an account for these funds work:

  • When an account is made for undeposited funds, you can deposit money in it.
  • As you deposit a certain amount in a bank, the same amount can be cleared via undeposited funds from their account.

How Do I Clear Undeposited Funds in QuickBooks Online?

To clear undeposited funds in QuickBooks, two methods can be used. Using the Remove and Record method, the wrong entry under Uncategorized Fund is removed. Then the same entry is made in a bank account. In the Dummy Bank Account method, the undeposited funds to be cleared are transferred to a dummy account.

To tell you more about how these two methods work, below we have explained them in detail.

Method 1: Remove and Record Method

In the Remove and Record method, any uncategorized transaction with cash inflow is reversed in QuickBooks. This helps in clearing the undeposited funds in the software. This also removes the error from the Banking entries after which the original amount is entered with the correct details. A proper bank account needs to be selected at the time of re-entering the amount to be deposited.

Below, we have described how to clear up undeposited funds in QuickBooks using the Remove and Record method.

  • Open your “QuickBooks” account.
  • Move to the “Banking” tab.
  • Click on “Bank Account” from the dropdown.
  • Hit “Undo” under “Uncategorized Money-in Transactions”.

Note: This step will remove the error you have done with the payment under the uncategorized section.

  • Go to the “Bank Deposit” tab.
  • Select the bank account which you need to work on.
  • Enter the payment date and then select the removed payment.
  • Click on “Save”.
  • Hit “Close”.

This method will clear the payment amount from the Undeposited Fund account. The same amount will now get deposited into your real-time bank account.

Method 2: Dummy Bank Account Method

In the Dummy Bank Account method, first, you need to create a dummy bank account for removing QuickBooks’ undeposited funds. This will allow you to directly transfer amounts from the Undeposited Fund account to this bank account. Lastly, move the amount from the dummy account to any real-life bank account.

These steps can explain more about how to clean up undeposited funds in QuickBooks:

  • Open “QuickBooks”.
  • Go to the “Settings” tab.
  • Click on “Chart of Accounts”.
  • Click on “Create New”.
  • Name the new account as “Dummy Bank Account”.
Dummy Bank Account
  • After entering all the necessary details, click on “Save”.
  • On QuickBooks “Home Page”, move to the “Bank Deposits” tab.
  • Click on “Dummy Bank Account”.
  • Select all the payments you want to clean from the “Undeposited Fund” account and save the page.

Note: This step will transfer the amount from the “Undeposited Fund” account to this dummy account. Hence, the amount will get easily cleared.

  • Now choose “Expense”.
  • Select the same “Dummy Bank Account” option.
  • After this, you need to select an active account which receives incomes and earnings.

Note: This action will transfer the amount from a “Dummy Bank Account” to a real-life bank account.

  • Click on the “Save” button and close the window.
  • Go to the “Dummy Bank Account” page and check whether or not the balance is zero.

How to Clear Undeposited Funds in QuickBooks Desktop?

Removing the amounts from the Undeposited Fund account in QuickBooks Desktop can be done by making real-time deposits from the Banking section. Once you enter the amount and click on Ok, the amount will get deposited in your bank. Simultaneously, it will be cleared from QuickBooks Desktop.

Below we have mentioned the steps explaining how to clean up undeposited funds in QuickBooks Desktop.

  • Log in to your account in “QuickBooks Desktop”.
  • Move to the “Banking” section.
  • You will get several dropdown options. Choose “Make Deposits”.
  • Find out the payment that you want to remove from the “Undeposited Fund” account.
  • Select the payment and then tap on “Ok”.
  • A deposit window will open. Click on the “Deposit” option.
  • A series of bank accounts will be displayed. Choose a preferred account.
  • After this, enter the deposit date and other information you would like to record in the transaction detail.
  • Save the deposit by clicking on “Ok”.

This will clear the same amount you have deposited from the Undeposited Fund account.


In the article, you learned about undeposited funds in the QB program and how they work. We also explained how to clear out undeposited funds in QuickBooks. In addition, we have discussed the two main methods to remove funds from the Undeposited Account. A similar approach can be used when you want to remove the funds from QuickBooks Desktop.

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