Hello Jonnybegood!

I'd like to jump in and help.

One of the deposits in your register in this case is a separate transaction and should be deleted. Then, you'll want to create a bank deposit and choose the payments setting in the undeposited funds to move them out of that account.

As for your other question, money will be posted to your Undeposited Funds if you choose that account in the Deposit to field of the payment transaction. Check your payment transaction. There's a Deposit to field. You can choose your bank account in that field if the payment (actual money) if the money is directly deposited into your bank account at the time of payment. On the other hand, you'll use Undeposited Funds if you deposit the money at a later time. Please refer to this article: Using Undeposited Funds in QuickBooks Online.

Let me know if you have more questions.