Undeposited Funds
Definition
Undeposited Funds is a clearing account that holds customer payments until they are grouped and deposited to the bank. It should return toward zero once deposits are made.
Example
Three customer payments of $300, $450, and $250 are recorded to Undeposited Funds. The bookkeeper groups them into one $1,000 bank deposit, clearing the account.
Why It Matters
An old balance in Undeposited Funds often means a payment was recorded but never deposited, or a deposit was recorded incorrectly.