- \n
- Clearing accounts temporarily store financial transactions before they are permanently recorded elsewhere.<\/li>\n\n\n\n
- They help organize and categorize transactions, aiding in accurate reconciliation and tracking.<\/li>\n\n\n\n
- They\u2019re beneficial for inventory tracking, managing refunds, simplifying expense calculations, reducing errors, and providing high detail in financial records.<\/li>\n\n\n\n
- Synder, an accounting automation software, automatically creates clearing accounts, streamlining reconciliation processes for ecommerce businesses.<\/li>\n\n\n\n
- Understanding the differences between clearing accounts and checking accounts is essential for efficient financial management.<\/li>\n<\/ul>\n\n\n\n
<\/p>\n\n\n\n
Contents:<\/b><\/h2><\/p>\n
1. What is clearing account?<\/a><\/p>\n
- \n
- Definition<\/a><\/li>\n
- Automatic creation with Synder accounting app<\/a><\/li>\n
- What is the purpose?<\/a><\/li>\n<\/ul>\n
2. How does it work?<\/a><\/p>\n
- \n
- Managing payment gateways with Synder<\/a><\/li>\n<\/ul>\n
3. The difference between a clearing and checking account<\/a><\/p>\n
- \n
- Checking account definition<\/a><\/li>\n
- Clearing account vs. checking account<\/a><\/li>\n<\/ul>\n
4. Benefits of using a clearing account for your ecommerce business<\/a><\/p>\n
5. Setting up a clearing<\/a><\/p>\n
6. Clearing reconciliation in QuickBooks<\/a><\/p>\n
- \n
- Synced vs. cleared vs. reconciled transactions<\/a><\/li>\n<\/ul>\n
7. Discovering other uses<\/a><\/p>\n
8. Wrapping up<\/a><\/p>\n
9. FAQs<\/a><\/p>\n\n\n\n
<\/p>\n\n\n\n
What is clearing account?<\/strong><\/span><\/h2>\n\n\n\n
Sometimes there is a need for a safe buffer space for different types of transactions that have not yet taken place or require some type of specific detailing or processing.<\/p>\n\n\n\n
Here, information about financial movements is kept temporarily until it is smoothly transferred to the main account. <\/p>\n\n\n\n
Thus, a clearing account helps segregate transactions from the principal accounting ledger.<\/p>\n\n\n\n
Definition<\/span><\/h3>\n\n\n\n
According to the Accounting Coach dictionary<\/a>, a clearing account is:<\/p>\n\n\n\n
\n
\u201cA general ledger account which serves to summarize similar transactions.\u201d<\/em><\/p>\n<\/blockquote>\n\n\n\n
Typically, clearing accounts contain amounts that are to be transferred to another account at a later stage. <\/p>\n\n\n\n
For example, an account with revenue and expense amounts that are to be transferred to retained earnings at the close of a fiscal period. <\/p>\n\n\n\n
Related terms for a clearing account you can encounter:<\/p>\n\n\n\n
- \n
- zero-balance account,<\/li>\n\n\n\n
- temporary account,<\/li>\n\n\n\n
- buffer account,<\/li>\n\n\n\n
- wash account,<\/li>\n\n\n\n
- summary account,<\/li>\n\n\n\n
- holding account.<\/li>\n<\/ul>\n\n\n\n
These clearing accounts (can be just one or many) can be \u0441reated for you automatically<\/a>. <\/p>\n\n\n\n
Are you curious about how it works? Do you want to reconcile in one click? Then get comfortable, and we’ll tell you everything step by step, but briefly. <\/p>\n\n\n\n
<\/p>\n\n\n\n
Automatic creation with Synder accounting app<\/strong><\/span><\/h3>\n\n\n\n
Picture this: You are looking for an easy way to communicate your Shopify stores with QuickBooks Online company. With Synder’s Shopify integration<\/a>, all your sales and expenses will be automatically recorded and prepared for one-click reconciliation in your QuickBooks. <\/p>\n\n\n\n
The software allows multicurrency accounting<\/a> for your Shopify payments and Shopify orders paid via alternative payment providers like Stripe, PayPal, etc., providing accurate records of your Shopify sales, processing fees, taxes, customers, discounts, and other transaction details. Synder will help you track inventory<\/a> in QuickBooks and categorize<\/a> all synced data automatically to keep your books up-to-date and precise.<\/p>\n\n\n\n
Upon connecting your platforms to Synder for the first time, a clearing account is automatically generated in the \u2018Chart of Accounts.\u2019<\/em> This action enables Synder to mirror real-world money flows accurately. It temporarily holds the records of transactions synced into the system, for example, from an ecommerce platform, a payment processor, or something similar. It does opening balance equity<\/a>. <\/p>\n\n\n\n
Are you an ecommerce business? If you want to improve your ecommerce accounting, sign up for a free trial<\/a> or book a spot at the Weekly Public Demo<\/a> to understand how Synder can help you stay on top of accurate reporting, flawless reconciliation, and a smooth tax season. <\/p>\n\n\n\n
What is the purpose?<\/span><\/h3>\n\n\n\n
The purpose<\/strong> of this type of account is to set aside the payment details before the ultimate transaction finalization.<\/p>\n\n\n\n
1. How do accountants use clearing accounts?<\/strong><\/p>\n\n\n\n
Accountants use clearing accounts to store money-in and money-out<\/strong> <\/em><\/strong>information<\/strong> for a short period of time until everything is ready to be officially registered in the permanent records. <\/p>\n\n\n\n
Also, accountants use these types of accounts to ensure accurate recording & tracking of transactions<\/strong> involving multiple steps or parties. This helps reconcile discrepancies<\/a> and ensures that transactions are properly allocated before they are finalized in their respective accounts.<\/p>\n\n\n\n
2. How do businesses use clearing accounts?<\/strong><\/p>\n\n\n\n
Businesses can use these types of accounts to document all sales, items, fees, shipping details, taxes, or other expenses<\/strong> that have not yet been fully and properly accounted for. <\/p>\n\n\n\n
A clearing account can also be very helpful in managing accounts receivable, making it an essential part of AR automation<\/a> (let\u2019s say, in the case of unpaid invoices). <\/p>\n\n\n\n
Generally speaking, it\u2019s useful anytime a business or an accountant wants to deal with certain types of transactions or keep some specific money flow details separate before balancing the sheets.<\/p>\n\n\n\n
The general flow looks like this:<\/p>\n\n\n\n
- \n
- Enter transactions into a safe buffer space.<\/li>\n\n\n\n
- Zero out the balance.<\/li>\n\n\n\n
- Move transactions to the principal account.<\/li>\n<\/ol>\n\n\n\n
But let\u2019s see it in more detail.<\/p>\n\n\n\n
How does it work?<\/strong><\/span><\/h2>\n\n\n\n
A clearing account helps businesses and accountants temporarily record financial transaction details. It\u2019s created to record income or expenses before they are transferred to retained earnings in the balance sheet.<\/p>\n\n\n\n
Clearing accounts are \u201ccleared\u201d<\/strong> systematically using ACH technology<\/a>. This means that all of the data from this account is transferred to another place, and the balance becomes equal to zero. The account can get cleared:<\/p>\n\n\n\n
- \n
- at the end of the fiscal year, <\/li>\n\n\n\n
- monthly, <\/li>\n\n\n\n
- or sometimes even daily. <\/li>\n<\/ul>\n\n\n\n
For example, a clearing account used to record utility expenses may be closed monthly, whereas an account of daily cash receipts might be closed each day.<\/p>\n\n\n\n
When the balance of the clearing account is perfectly zeroed, then you know that your bookkeeping is done correctly. All information can be registered in the main accounting ledger without errors.<\/p>\n\n\n\n
Managing payment gateways with Synder<\/strong><\/span><\/h3>\n\n\n\n
Synder creates clearing accounts in your QuickBooks or Xero accounting system that reproduces the real money flows from any payment gateway. <\/p>\n\n\n\n
There is a vast list of ecommerce platforms or payment providers with which Synder can integrate<\/a>. If not, you can always import payments from Excel<\/a>. So, technically any gateway you can possibly receive payments from can be accounted for by Synder.<\/p>\n\n\n\n
Let’s simulate the situation, shall we?<\/p>\n\n\n\n
Let\u2019s say your business receives payments via Stripe from a customer. The money gets transferred from the customer\u2019s Stripe account to yours and is kept there for some time. You can\u2019t see them on your real bank account or manage this money for a moment.<\/p>\n\n\n\n
That is how a clearing account reflects a real-life situation and plays the role of a payment provider in the accounting system. The clearing accounts created by Synder will also be named after the payment provider, e.g. the \u2018Stripe bank account.\u2019<\/em><\/p>\n\n\n\n
The balance of this clearing account allows you to easily track whether all transactions are in the accounting. <\/p>\n\n\n\n
If all types of transactions are synced, all sales and payouts, then the balance of the clearing account in your QuickBooks or Xero will be equal to the Stripe account balance (or whichever gateway is connected).<\/p>\n\n\n\n
The difference between a clearing and checking account<\/strong><\/strong><\/span><\/h2>\n\n\n\n
Now you know that funds are stored in the clearing account for a short time before being relocated elsewhere. Where do they go?<\/p>\n\n\n\n
In Synder, transactions from the clearing account go to your checking account. So, it\u2019s important to understand the difference between these two types of accounts.<\/p>\n\n\n\n
Synder automation software uses the flow with a clearing account instead of just syncing deposits to a checking account. This achieves a high level of accuracy in reconciliation and makes the process easier.<\/p>\n\n\n\n
Checking account definition<\/strong><\/span><\/h3>\n\n\n\n
A checking account<\/a> is a bank account that allows you to withdraw and deposit money.<\/p>\n\n\n\n
Related terms for a checking account are:<\/p>\n\n\n\n
- \n
- current account,<\/li>\n\n\n\n
- bank account,<\/li>\n\n\n\n
- transactions account,<\/li>\n\n\n\n
- deposit account.<\/li>\n<\/ul>\n\n\n\n
In your accounting software, a checking account is your current bank account that you connect to the accounting system and use for money transfers and reconciliation.<\/p>\n\n\n\n
Clearing vs checking account<\/span><\/h3>\n\n\n\n
Now, we’ll compare the clearing and checking accounts across some parameters.<\/p>\n\n\n\n
Aspect<\/strong><\/td> Clearing account<\/strong><\/td> Checking account<\/strong><\/td><\/tr> Purpose<\/strong><\/td> Used as a buffer account within the accounting software to temporarily hold transaction data.<\/td> Represents a real account held in a bank and linked to the accounting software.<\/td><\/tr> Data retention<\/strong><\/td> Primarily retains transaction information, serving as a bridge between different accounts.<\/td> Stores both real money and transaction information, accurately reflecting the company’s financial status.<\/td><\/tr> Transaction flow<\/strong><\/td> Transactions recorded in the clearing account are temporary and are typically transferred to other accounts later.<\/td> Transactions recorded in the checking account are permanent and directly impact the company’s cash balance.<\/td><\/tr> Financial status<\/strong><\/td> Essential for organizing and categorizing transactions before they are permanently recorded in the ledger.<\/td> Facilitates everyday financial activities such as payments, deposits, and withdrawals, offering real-time access to funds.<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n Benefits of using a clearing account for your ecommerce business<\/strong><\/strong><\/span><\/h2>\n\n\n\n
Ecommerce businesses can benefit largely from using clearing accounts in their bookkeeping. <\/p>\n\n\n\n
Here are some of the reasons why.<\/p>\n\n\n\n
![\"Benifits](\"https:\/\/synder.com\/blog\/wp-content\/uploads\/sites\/5\/2024\/03\/Steps-of-the-accounting-cycle-2.png\")
<\/figure>\n\n\n\n- \n
- Easier inventory tracking. <\/strong>For the purpose of inventory tracking and fulfillment, it\u2019s common for an ecommerce business to record the initiation of the sales process and relief of inventory well before the final deposit.
<\/li>\n\n\n\n- Managing refunds & returns. <\/strong>When saved to the clearing account, expense or refund information can be processed and matched to the existing transactions before they are deposited or reconciled to the bank.
<\/li>\n\n\n\n- Simpler calculations of expenses. <\/strong>The advantages of the clearing account extend to almost all types of expenses and payments, starting with sales tax and ending with processing payroll.
<\/li>\n\n\n\n- Diminishing errors & discrepancies. <\/strong>Clearing accounts are used separately from the main ledger and the actual checking account. This helps reduce the possibility of unwanted mistakes in reporting to the minimum.
<\/li>\n\n\n\n- High level of detail. <\/strong>Using a clearing account as a buffer allows business owners and accountants to match all kinds of financial details in a \u201cbuffer\u201d mode. The balance of the clearing account helps identify issues if that\u2019s the case. If something doesn\u2019t match, tracking what is missing is easier.
<\/li>\n\n\n\n- Managing multiple ecommerce accounts. <\/strong>Synder creates a separate clearing account in your accounting system for each ecommerce business (if you have many) or a payment processor.
For example, you can have one clearing account for Shopify payments<\/a>, another for PayPal, and another for Stripe transactions. This separation of money flows facilitates the bookkeeping process by helping to identify issues and discrepancies precisely.
<\/li>\n\n\n\n- Accurate reconciliation. <\/strong>Clearing accounts is trouble-free, as you are not afraid to mess up the books. Issues or missing transactions can be easily identified. Reconciliation is successful if all transactions match and the account clears to a zero balance.<\/li>\n<\/ul>\n\n\n\n
Setting up a clearing <\/strong><\/span><\/h2>\n\n\n\n
- Managing refunds & returns. <\/strong>When saved to the clearing account, expense or refund information can be processed and matched to the existing transactions before they are deposited or reconciled to the bank.
- Easier inventory tracking. <\/strong>For the purpose of inventory tracking and fulfillment, it\u2019s common for an ecommerce business to record the initiation of the sales process and relief of inventory well before the final deposit.
- Clearing account vs. checking account<\/a><\/li>\n<\/ul>\n
- Checking account definition<\/a><\/li>\n
- Automatic creation with Synder accounting app<\/a><\/li>\n
- Definition<\/a><\/li>\n