What is the purpose of the Undeposited Funds account in QuickBooks Online?

The Undeposited Funds account serves as a holding account for payments received before they are actually deposited into the business's bank account. When a business receives payments, such as customer invoices, these payments are initially recorded in the Undeposited Funds account. This allows users to keep track of all received payments in one place until they are ready to make a physical deposit at the bank.

Once the payments are deposited, they can be removed from the Undeposited Funds account and recorded in the appropriate bank account. This process helps ensure accuracy and provides a clear picture of outstanding or pending deposits, which can aid in maintaining accurate financial records.

The other options do not accurately reflect the function of the Undeposited Funds account. While tracking pending invoices is vital for managing accounts receivable, it does not align with the purpose of this account. Similarly, managing payroll transactions and applying bank interest payments are unrelated functions that do not involve the individual management of received payments awaiting deposit.