Automatically apply payments
This option allows you to tell QuickBooks to apply payments automatically to open invoices.  If a payment is larger than any of the open invoices, QuickBooks applies it, starting with the oldest invoices, until the amount is used up.  If a payment is smaller than any of the open invoices, it applies to the oldest invoices first.  As you can imagine, QuickBooks may apply it to a wrong invoice, especially if you have invoices with many similar amounts.  Or, if a customer sends the incorrect amount of payment, you can’t spot it right away.  For these reasons, you will be able to manage your payments better by turning this option off.

Automatically calculate payments
If you leave this option off, you have to type the amount of payment in the Amount field, as shown in the example below, of $100.  You then have to choose which of the three open invoices you want to apply the payment to – invoice number 10 is selected in the example.  If there is an underpayment, QuickBooks asks you whether you want to keep the underpayment or write it off.  Since there is an underpayment of $12, you can see that there is an Underpayment pane at the bottom left  and the two options "Leave this as an underpayment" and "Write off the extra amount":


QB Payments Preferences 2


If you turn on this option, you choose open invoices first, QuickBooks will calculate the amount in the Amount field automatically.  If you choose more than one invoice, it will add up the amounts.

Use Undeposited Funds as a default deposit to account
If you deactivate this option, you will have the “Deposit To” field in the Receive Payments window above, with drop-down menu of your existing bank accounts.
If you turn on this option, QuickBooks will not show the “Deposit To” field and automatically apply customer payments to Undeposited Funds account.  This is useful if you often receive a handful of payments before depositing it to your bank.  With the actual bank deposit and QuickBooks deposit showing the same amount, bank reconciliations will be easier and quicker.