How to Set Up and Use a Clearing Account in Quickbooks
Still struggling to create a clearing account in Quickbooks? As you may already know, clearing accounts are used to transfer money between two accounts when you are otherwise unable to move the money directly. It typically begins with a $0.00 balance. And when you put money into the clearing account, you’ll remove the same amount, thus maintaining its $0.00 balance. In Quickbooks, a clearing account can be used to manage customers, vendors, accounts receivables, move foreign currency without converting, write off unpaid bills and more.
It’s called a “clearing account” because it’s used as a temporary account with costs or amounts that are to be transferred to another account. A common example is an income summary statement with revenue and expenses, which are usually transferred to a retained earnings account at the end of a period.
Steps to Creating a Clearing Account
To create a clearing account in Quickbooks, log in to your account and access Lists > Chart of Account > right-click and choose “New.” This will bring up a window for creating a new account, at which point you can click the “Bank” button. Next, click “Continue,” and in the “Account Name” field, enter either “Wash Account,” “Barter Account” or “Clearing Account.” When finished, click “Save & Close” to complete the process.
As previously stated, you shouldn’t create a balance for your clearing account. Although Quickbooks gives you the option to include a balance, it’s recommended that you leave it at $0.00. With a clearing account, you’ll remove the same amount of money that you put it. Therefore, the opening balance should be kept at $0.00.
How to Use a Clearing Account
Now that your clearing account has been created, you might be wondering how to use it. Well, the exact steps to using a clearing account varies depending on its function. Normally, however, it involves creating a journal entry, adding the accounts receivables or accounts payables from which the money is being transferred, adding the clearing account, saving the journal entry, creating another journal entry, adding the clearing account, adding the accounts receivables or accounts payables to which the money is being transferred, and in the “Pay Bills” or “Receive Payments,” link the two journal entries together.
By following the steps listed here, you should be able to create and use a clearing account in Quickbooks. Just remember to use a $0.00 opening balance.
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