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.
Create a Clearing Account
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.
Use the Clearing Account
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 at auction. The total sale was for $1650. The auction house charges a $150 fee for their services. They will pay you a net $1500. Now let's record that in TrulySmall Accounting.
Step 1: Record the Primary Invoice and Payment
Click on the Invoices page from the menu, then click on the + New button above the transaction list. Add the item, recording the full amount, and click on the Save button to add the invoice.
Next, click on the Payments button at the top of the window to record a payment for the full amount. Select your clearing account from the "Account" options. Click on the Add Payment button when you are finished.
Now you can close the Payments window and return to the Invoices list.
Step 2: Transfer the Deposited Funds into the Clearing Account
Click on your Inbox from the menu and locate the deposit transaction. Now click on the checkbox to the left, then click on the Edit icon above 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.
Step 3: Pay for the Expense from the Clearing Account
Now we will record the expense charge.
Click on Transactions in the menu, then click on the + Add button and select the "Expense" option.
In the Add Expense window, select your clearing account as the "Paid from Account". 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 each transaction has been recorded correctly.