In this tutorial, you will learn to record bank deposits in QuickBooks Online. Recording bank deposits in QuickBooks Online is a two-step process. First, checks from customers are received and placed in the Undeposited Funds account. Second, checks from the Undeposited Funds account are grouped and combined with noncustomer checks to create a single deposit.
Thank you for taking the time to complete this free tutorial for QuickBooks Online, our best overall pick for small business accounting software. This tutorial will be more useful if you follow along in your own QuickBooks account. If you don’t already subscribe to QuickBooks, you can choose from a 30-day free trial or 50% off for three months.
This tutorial is one in our series of Free QuickBooks Tutorials. The video below and the step-by-step illustrated instructions that follow present the same information.
Why Recording Deposits in QuickBooks Online Is Important
A tenet of good bookkeeping is tracking all of the activity running through your bank account. Therefore, it’s important that any deposits to your bank account be recorded in your accounting records. This is true even for deposits that are not income, such as investments by the business owner.
How to Record a Deposit in QuickBooks Online
1. Receive Customer Checks and Record as Undeposited Funds
Before recording a deposit in QuickBooks Online, you must record the receipt of customer checks as Undeposited Funds, which has been demonstrated in previous tutorials. In new QBO accounts, the undeposited funds account has a default name of Payments to Deposit. To review how to record the receipt of checks from customers that have been issued an invoice, see How to Receive Payments. The receipt of checks from customers when no invoice was issued was covered in How to Create QuickBooks Online Sales Receipts.
Why use Undeposited Funds: Using the Undeposited Funds account makes tracing from your check register to the bank statement easy. Undeposited Funds groups an unlimited number of customer checks onto a single deposit slip that will show up in the check register as a single amount. This is important because the deposit will appear on the bank statement as a single amount as well.
2. Create a New Deposit
To create a new deposit, click the New button above the left menu bar and then select Bank deposit from the far-right column:
The top of the bank deposit screen requires you to choose a bank account and input the date of the deposit:
While QuickBooks allows you to choose current asset accounts, such as prepaid expenses, it would be very unusual to do so. Be sure to select the bank account where you will be depositing the funds. Then, scroll down to the next section, which allows you to choose the customer checks that will be included in the deposit.
3. Add Customer Checks From Undeposited Funds
Think of Undeposited Funds as an envelope where you place all the customer checks as you receive and record them in step one. Making the bank deposit is like taking the checks out of the envelope and listing them on the deposit slip:
QuickBooks Online provides a list of the checks you have received from customers and placed in Undeposited Funds. All the information on this screen is carried over from when you recorded receipt of the payment. Place a checkmark next to each customer check that will be included in this deposit and then scroll down to add noncustomer checks in the next step.
4. Add Other Checks to the Deposit
The next section of the bank deposit screens allows you to add checks that are not included in Undeposited Funds. These are generally noncustomer checks such as tax refunds, insurance proceeds, or vendor refunds:
If the check is a refund of an expense, select the account where the original expense was recorded. For instance, in this example, Paul’s Plumbing is recording their tax refund as a reduction in the Taxes account. I recommend including the number of the check being deposited to leave a trail if you need to investigate any problems later. Be sure to include a Class if you’ve enabled class tracking in your advanced settings.
5. Record Cash Back and Print Your Bank Deposit
The bottom of the bank deposit screen allows you to record any cash back you receive from the deposit:
If you receive cash back at the time of the deposit, you must specify the amount and an account or category. Any cash back will reduce the deposit recorded in your check register to match the actual deposit on your bank statement.
If you’re making the deposit in person, I recommend printing a deposit summary to give the teller. To do this, click on the Print button at the bottom of the screen and select Deposit Summary. Be sure to click the green Save and close button to complete the deposit.
Congratulations on completing another tutorial in our QuickBooks Online Training Course. You’ve learned how to deposit customer checks previously received and placed in Undeposited Funds. You’ve also learned to deposit noncustomer checks and how to record cash back on your deposit. The next tutorial in our QuickBooks Online Training Course is How to Transfer Funds Between Bank Accounts.