How is a clearing account used?
You know both entries in advance. The payroll cash will leave the bank, and the payroll report will arrive. Both halves of a transfer will appear, one on each statement. You route both through the clearing account and it empties itself.
If it does not empty, the amount left is exactly the pair that did not meet. That is why a clearing account works as a control.
How is a suspense account used?
Something arrives that you cannot classify: a deposit nobody recognizes, a payment with no document behind it. You do not guess. You put it in suspense, and you ask.
A suspense account does not empty itself. Somebody has to answer each question.
A side-by-side example
A 3,000.00 draft leaves the bank on payroll day.
- You know it is the payroll tax draft. It goes to payroll clearing, where it will meet the payroll entry.
- You have no idea what it is. It goes to suspense, with a note to ask the client.
Same amount, same day. The difference is whether you know what it will meet.
What are the rules that keep both useful?
- One clearing account per flow. Payroll clearing, transfer clearing, undeposited funds. Never one general account.
- Clearing is 0.00 at period end. A balance means a pair did not meet.
- Never let clearing become suspense. If an unknown item lands in payroll clearing, move it to suspense. Otherwise payroll clearing stops proving anything.
- Every suspense item has an owner and a date. Suspense without follow-up is where errors go to be forgotten.
What happens at close?
Both should be empty, for different reasons. An unexplained clearing balance means a flow is broken. A suspense balance means the books have open questions.
In LedgerDock both are checked before a month can lock: every clearing account must net to zero, and anything still open needs a written reason. See when a month is really closed.