A Clearing Account is a temporary holding account containing costs or amounts that will ultimately be transferred to another account. They are used to hold transactions for later posting, and ensure information is recorded correctly and completely. It is similar to an Undeposited Funds account, but Undeposited Funds is not meant to be used for this purpose.

Here’s a common scenario:

Your customers pay for invoices using credit cards. These credit card transactions are processed via a merchant service provider (like Stripe), who holds these payments for a certain period and then deposits the funds into your bank account. They deduct a processing fee for their services directly from the payment.

Click on the Accounts page in the menu, then click the + symbol above the accounts list and select "Add Account". Select "Cash" as the Type of Account. Click on the Add button when you are finished.

Now that you have the account setup, there are just 3 steps to record the activity and ensure the transactions balance.

To demonstrate we will use an example. Suppose you have sold an art piece for $1,300. The merchant (Stripe) charges a $50 processing fee for their services. They will pay you a net deposit of $1,250. Now let's record that in TrulySmall Accounting.

We sent an $1,300 invoice to Mackenzie Smart for the art piece. Here's a screenshot of the invoice in TrulySmall.

The client paid the invoice through Stripe, so TrulySmall will automatically update the invoice to reflect the $1,300 payment. The payment will be deposited into the Merchant Clearing account.

After some time has passed, the merchant will release the funds to our business bank account. In this example, our bank account only receives a payment of $1,250 due to fees withheld by the merchant (Stripe). So we'll locate the bank deposit transaction on the Inbox page. Select the checkbox on the left, then click on the Edit icon at the top of the list.

In the Edit window, click on the Transfer tab, then select your clearing account as the "Withdraw From" account. Click on the Post button to post the transfer.

Now we will record the processing fee which was withheld by the merchant (Stripe). In this example, we calculate it by subtracting $1,250 from $1,300, which leaves a fee of $50.

Click on the Transactions page, then click on the + Add button and select the "Expense" option.

In the Add Expense window, select your clearing account as the "Account Withdrawn From". The amount will equal the the charges you paid. Then choose the Expense category that best fits that charge. Now click on the Post button to post the expense.

At this point your clearing account will have a zero balance, which means all transactions have been settled and recorded correctly.

*Note: If you have any funds that have not yet been released to your bank account, this will result in a non-zero balance in the Clearing account.