Undeposited checks are checks that have been received from customers, but not yet deposited. There are several possible reasons why a business might have undeposited checks, including the following:
- The business operates on the cash basis of accounting, and does not want to record any additional income in the current reporting period.
- The amount of cash represented by the undeposited checks is so small that the accounting manager does not bother to make a deposit, preferring to instead wait for more checks to arrive.
- The checks are postdated, so the entity cannot yet deposit them.
Ideally, undeposited checks should be reported by the recipient in its balance sheet as cash.