Errors happen. We are all human and are prone to make mistakes from time to time. Even the most careful among us.
So, watching for and correcting errors that happen is a part of managing a business. Even accounting errors.
Let’s look at a common mistake, usually from newer QuickBooks users, and an easy way to correct that mistake.
Sometimes a deposit can be duplicated in QuickBooks. This usually results from entering the amount of the deposit in two different ways and not fully understanding the behind-the-scenes- workings of the software.
Below is a portion of the November 30th reconciliation report from our sample company, Rock Castle Construction.
A $5000 deposit dated October 15th remains uncleared. Since the statement date we reconciled was November 30, this appears to be an error. If a deposit was actually made on October 15, why doesn’t the bank have record of it by November 30?
A closer examination of the reconciliation report gives us a clue.
In the section of the report that shows the deposits that did clear, we find…. another $5000 deposit.
We are certain we did not make two $5000 deposits on the same day. Let’s examine the deposit that cleared and see the detail.
This has not been created from a customer payment. Look at the From Account column. The deposit posts directly to the income account, Construction Income.
A close look at the deposit that did not clear shows it to be a payment from our customer Chris Baker. That payment posts against an invoice. That is the correct deposit. The one shown above is a duplicate.
As a duplicate it needs to be voided or deleted. But if we do that, our entire bank reconciliation is thrown off and we would then need to correct that.
There’s an easier way.
Open the deposit transaction that did not clear.
Notice that the Deposit To field has been filled in with the account Checking. Change this to Undeposited Funds.
Now, back to the deposit that cleared. Click on the Payments icon. This brings up the Payments to Deposit window. In the list of payments is the deposit we just edited to be in the Undeposited Funds account.
Select that and choose okay. The payment pulls into the deposit window, making the total deposit $10,000. Delete the line posting to Construction Income. You can easily do that by clicking on that line and using the key combination Ctrl-Delete.
Now our deposit is $5000 and it is made up of the one payment from Chris Baker. When we save, our reconciliation status remains intact since the deposit amount has not changed.
This type of error can be avoided by always using the Undeposited Funds account. There is a preference for that. Edit->Preferences->Payments->Company Preferences->Use Undeposited Funds as a default deposit to account.
Hector Garcia, CPA
Certified Advanced QuickBooks ProAdvisor
12401 Orange Drive #136
Davie, FL 33330