What does a clearing account do?
Some money reaches your books twice. Payroll is the clearest case: the bank shows cash leaving, and the payroll provider sends a report that explains what that cash was. Both are true, and both need to be recorded.
A clearing account lets those two records meet without anyone pairing them by hand. The report credits the clearing account. The bank lines debit it. When both have posted, the account is empty.
A worked example: one payroll run
The numbers below are an example. Gross wages are 10,000.00, employer taxes are 800.00, and the provider pulls two drafts from the bank: 7,800.00 of net pay and 3,000.00 of taxes.
The entry from the payroll report:
| Account | Debit | Credit |
|---|---|---|
| Wages expense | 10,000.00 | |
| Payroll tax expense | 800.00 | |
| Payroll clearing | 10,800.00 |
The two bank lines, each coded to the clearing account:
| Account | Debit | Credit |
|---|---|---|
| Payroll clearing | 7,800.00 | |
| Cash | 7,800.00 | |
| Payroll clearing | 3,000.00 | |
| Cash | 3,000.00 |
Payroll clearing was credited 10,800.00 and debited 10,800.00. It holds 0.00.
Why is that better than matching?
Matching software pairs two lines and treats the pair as settled. If the pairing is wrong, the error is inside the ledger and looks correct.
A clearing account does not hide anything. If the tax draft was coded somewhere else, the account is off by exactly 3,000.00, and that number tells you where to look.
What are the rules for using one?
- One clearing account per flow. Payroll, transfers, undeposited funds, each card processor. A single general “clearing” account tells you nothing when it has a balance.
- It must be 0.00 at period end. That is what makes it a control and not a place to park things.
- Never use it for unknown items. Something you cannot classify belongs in a suspense account, not here.
How does a close tool use clearing accounts?
In LedgerDock, “Clearing is empty” is one of the four checks before a month can lock. Every clearing account must net to zero, or the reason is written into the close beside your name. See how a close works.