Undeposited Funds at Year End: What to Check in QuickBooks Online Before You Close

Published October 12, 2026 · LedgerMedic

Before you close the year, Undeposited Funds should hold only money that was genuinely in transit on the last day: payments received in late December that reached the bank in early January. Everything else is stale and should be cleared with a real deposit or a correction, not a balancing journal entry. Here is the check, step by step.

Step 1: pull the balance as of the last day of the year

1. Run the Balance Sheet with the report date set to December 31 (or your fiscal year end).
2. Click the Undeposited Funds amount to open the detail. Every line is a payment or sales receipt not yet in a deposit as of that date.
3. Export the detail to a spreadsheet and add two columns: Reached the bank on and Verdict.

Step 2: separate in transit from stale

• In transit. Dated in the last few days of the year, and the money appears on the January bank statement. Check the statement for each one. These are correct to leave in Undeposited Funds at year end.
• Stale. Anything older that is still sitting there. Match each one to a bank line in the year. If the money did reach the bank, the payment was never put into a deposit (or a deposit was added alongside it), so it needs correcting. If it never reached the bank, find out why before touching it.

Step 3: correct the stale items

1. If a bank deposit exists that was typed in or added from the bank feed, open it and rebuild it from the payments, or match the feed line to a deposit that contains them. Be careful not to create a duplicate deposit.
2. If the payment was recorded twice, void the extra copy after comparing both.
3. If the payment was never received, void it, and note why in the memo.
4. If the balance is negative, a deposit is drawing on a payment that is missing. See why it goes negative.

Step 4: mind the closing date

If a closing date or password is set on the books, QuickBooks will warn you before it lets you change transactions dated on or before it, and it may be set for a reason. If the year has already been closed and a return filed from it, talk to whoever prepared the return before changing prior-year transactions. They may prefer the correction be dated in the current year. We cannot tell you which, because it depends on your situation.

Step 5: do not plug it

A journal entry that moves the balance to another account makes the sheet look clean and hides the cause. It is the quickest way to get an uncomfortable question later. Fix the underlying transactions, then re-run the balance sheet and confirm only the in-transit items remain. The cleanup checklist has the full order of work if the list is long.