What is the general ledger (GL) impact of bank deposits?

The impact of bank deposits in the general ledger involves transferring funds from the Undeposited Funds account to the Checking account, which reflects an actual deposit made to the bank. When a business receives payments and those funds are initially recorded in the Undeposited Funds account, the process of making a bank deposit changes this recording.

By debiting the Checking account, you are increasing the balance in your cash account, which represents the funds that have been deposited into the bank. Simultaneously, crediting the Undeposited Funds account decreases its balance, reflecting the movement of funds out of this account since the deposit has now been completed.

This transaction is essential for accurate financial reporting, as it clearly indicates where the cash is held after the deposit has been made, ensuring that the accounts reflect the true cash position of the business. Prior to the deposit, funds are held as undeposited, and once they are deposited, they move to the checking account.