and now we will learn about health checks and undeposited funds we all know that sometimes we
get paid by check and of course there's usually a big time difference between the day we get paid
by the check and the day that we physically deposit the money into the bank now up until
now we have been recording transactions that get directly deposited into the bank but if we get it
paid by check on one day and we don't deposit the money for two weeks what do we reflect in
our accounting records during those two weeks remember our records have to show the fact that
the customer does not owe the money during those two weeks during those two weeks our records
should reflect the fact that we physically have the money but we can't record it in the way that
we recorded it in earlier videos because the money was not put directly into the bank so what do we
do well what happens when we get money if we get money for from a customer who previously owed us
money both accounts receivable in the chart of accounts and that particular customers balance
goes down and in previous videos we recorded the money into cash and bank because that's
what happened in that example but if the money did not go into cash and bank at the moment we
physically were handed a check which account do we record the money going into well that's
the reason why we have this special account called undeposited funds undeposited funds is the account
that represents the money received from customers that is expected to be deposited into the bank
it is a current asset and it's detailed type is undeposited funds and this is the first time we're
adding an account to the chart of accounts where we have to be mindful of the detail type to get
it to behave the way we need to making the detail type undeposited funds is what tells quickbooks
that this is an account that is connected to the deposit window in a special way it allows us to
keep track of each check or bit of cash and credit card swipes that we received but has not yet been
deposited into the bank now undeposited funds was not placed in our chart of accounts automatically
by QuickBooks when we created the account we will have to put it ourselves click accounting
then click chart of accounts then we can come over to the right and click new now the type of account
should be other current asset that allows you to choose the detail type undeposited funds you'll
have to click the detail type here and scroll down and come down to undeposited funds the very last
choice you could change the name to money waiting to be deposited or money we received but you know
you can put any name you want but the best name is really undeposited funds because it's well
known that this is money we expect to deposit into the bank we click Save and close and now we have
undeposited funds in our chart of accounts and we can use it now let's review receiving money let's
imagine on February 23rd we did 10 editing hours for kandi and she paid us a check for that well if
we got paid right right away whether it's check direct deposit cash or whatever we still have
to record a sales receipt but before we record a sales receipt let's discuss what the results
will be this time editing the income becomes what number well if we take a look at our trial balance
right now ooh custom reports my trial balance we can see that editing income here it is editing
income before this transaction is seventeen thousand nine hundred sixty but we just earned
more editing income fourteen hundred dollars worth so editing income will become nineteen thousand
three hundred sixty undeposited funds is going to show up for the very first time as one thousand
four hundred because this is the first payment in our hand of one thousand four hundred so let's go
ahead and make the sale receipt exactly the way we learned before in the top right we click the
plus sign we go over to the left and click sales receipt now the first thing you have to do is make
sure the date is all the way back as February 23rd then we choose the proper customer in this
case it's candy and of course what service did we provide for candy we provided in this case
the editing service QuickBooks remembers its 140 an hour so if we did ten of these the sales
receipt is in the amount of fourteen hundred now the only difference the only difference between
the previous examples and the one we're doing now is first we have to make sure that this money gets
deposited into undeposited funds now why is it going into undeposited funds for this one but in
the previous ones we chose cash and bank that's because this time the payment method which will
click for the pulldown the payment method is checked and if you choose payment method check
then QuickBooks knows that the reference number is actually the customer's check number that you
received so these three fields are the only fields that will be different if you receive
the check compared to the way we got paid before through direct deposit when we click Save we'll
check to make sure that the numbers in the trial balance are is exactly as what we expected when
we come back we see that editing income shows up as nineteen thousand three hundred sixty which is
the amount we expected and the fourteen hundred should appear for the first time in undeposited
funds here is undeposited funds showing up in the trial balance for the first time as
fourteen hundred now let's do a second example from the other transaction where we learned how
to receive money from customers let's imagine on February 24th we received a thousand dollars
cash in our hand from Betty for payment of the oldest open unpaid invoices well what will be
the results if we receive a thousand dollars cash well right now accounts receivable is twenty four
thousand four hundred forty but it will go down by a thousand if we actually get paid so accounts
receivable should become twenty three thousand four hundred forty now we know the money has to
go into undeposited funds because it is in our hand and not in the bank but what will it become
well if undeposited funds is only 1400 before that transaction then if we get another thousand in our
hand undeposited funds should become two thousand four hundred let's go ahead and record receiving
this payment we click the plus sign then we click receive payment just like we learned before don't
forget to advance the date to the 24th the date of this transaction the customer in this case
was Betty so we're going to choose Betty and of course we see Betty's open invoices appear
here very important you make sure that you are not depositing the money into the bank account
like the previous examples very important that you choose undeposited funds because we got the
money in our hand in this case the payment method is cash cash so that tells a person why there
is no reference number maybe we didn't write a handwritten receipt we just took the cash and said
thank you so the amount we received is a thousand and if we push the tab key QuickBooks assumes that
we're applying the money to the oldest invoice if there's no matching invoice for the money
amount so we agree with everything we put into the into the fields of this window now when we
click Save and close let's see if the numbers in the trial balance are what we expected them to be
well accounts receivable decreased to twenty three thousand four hundred forty which is the amount we
predicted and undeposited funds should be twenty four hundred if we come up here undeposited funds
twenty four hundred so the numbers are exactly as what we expected now let's pause the video for
you to enter these two on your own you'll know how to do them from the other two but we need
a little bit more and undeposited funds before we can actually practice making a deposit now
these are what your results are supposed to look like when you finish the other two cash and bank
should be twenty thousand three hundred seventy and undeposited funds should be ten thousand four
hundred and accounts receivable should be twenty one thousand four hundred forty editing income
should be nineteen thousand three hundred sixty and video income should be forty seven thousand
seven hundred so make sure you have the same numbers that I have and you should if you did the
sale receipt and payment correctly now let's talk about what happens when you physically deposit
the money undeposited funds will go down because you have less undeposited because you just made a
deposit of course cash and bank will go up because you just put some money into the bank for example
let's imagine we will deposit the February 27th excuse me let's imagine that on February 27th on
February 27th we deposit cheque number 171 7 from candy back from February 23rd when we received
that cheque and the thousand dollars in cash from Betty that we received on the 24th let's predict
what undeposited funds will become well right now on deposited funds is ten thousand four hundred
but if the amount that we're actually depositing is 2400 undeposited funds should become eight
thousand let's predict what cash and bank becomes well if cash and Bank is going to increase by two
thousand four hundred that means that cash and bank will become twenty two thousand seven hundred
so let's take a look at how to make the deposit from the plus sign in the top right we click bank
deposit now notice it's the same window we went to before but the reason it looks different is
because all of the money in undeposited funds or automatically shows up here if you notice
you can scroll down and get a section of this window that looked exactly the same way that
it looked before we had on deposited funds so you could still deposit the individual payments
in the same deposit as the other things and give the cash back the way we learned in the previous
videos would we made a deposit so the bottom part stays the same but the top part is listing
the items that are in undeposited funds now the instructions clearly said the cheque number 171
from the 23rd and the thousand dollars in cash from the 24th so check number one seven the money
we received on the 23rd which is reference number one seven one seven will place a checkmark in that
and QuickBooks tries to calculate the deposit what about the one thousand in cash that we received
on the 24th click the check mark in the left margin there so now we see if we're depositing
physically these two items we know that the total of this deposit is two thousand four hundred don't
forget the date that were physically depositing the money is here February 27 so we have to make
sure the date and the top right we bring it back to February 27 now it has all the information we
need make sure we're depositing it into Chase Bank and here we go when we click Save and close we now
check if the results and the trial balance or what we expect cash and bank twenty two thousand
seven hundred seventy well we predicted cash in Bank would be twenty two thousand seven hundred
seventy is undeposited funds eight thousand undeposited funds a thousand so that means we
did it correctly now in February 28 let's deposit the remainder of undeposited funds just for good
measure and see if you get the same numbers that I get let's do this the plus sign go to bank deposit
advance the date to the 28th now for depositing the remaining money in undeposited funds we click
the check mark on everything don't forget the date at the 28th it's going into cash and bank that's
it you don't have to use the bottom section because there's no cash back for expenses we
click Save and close and now when you finish this video your cash and bank should be thirty thousand
seven hundred seventy and your undeposited funds should be zero because we deposited all the money