Which account should be used to hold funds until they are deposited in a checking account?

• A. Suspense
• B. Petty Cash
• C. Undeposited funds
• D. Accounts Receivable

Answer: (C)

When you receive payments that haven’t yet been deposited, you need a temporary holding area to keep them organized until you actually put them in the bank. Undeposited Funds serves exactly this purpose in QuickBooks: it acts as a temporary collection place for cash and checks from customers before you record the bank deposit. This setup lets you group multiple payments into one bank deposit, so your records match the actual money that arrives at the bank and your reconciliation stays accurate.

Other options don’t fit because Petty Cash is a separate small cash fund for incidental expenses, Suspense is used for items whose classification isn’t yet known, and Accounts Receivable tracks amounts owed by customers rather than funds in transit to the bank.