What are these? There can be a lot of confusion about how to
use a clearing account, or why. A clearing account may be referred to as a
suspense account, or an Ask Accountant account, or an Ask Client account. On
your own books, you can call these accounts whatever you wish. There are really
two different ideas around these terms:
A SUSPENSE account
is often used as a temporary holding account for transactions, such as when we
have a question about what a transaction is for, and therefore which account it
should go in, or we need to talk to the client about it. (Or your bookkeeper,
if you’re on the other side.) QB will often call these Uncategorized Income or
Uncategorized Expense, or Ask My Accountant, depending on the QB version. At
year end, this account should be at zero. Even better is to have this account zeroed
out at every month-end close.
If I’m entering transactions for a client and have only
check numbers and amounts from a bank statement, I’ll put these transactions
into a suspense account until I can get the information on who the checks were
written to. I’d rather have the amounts entered and be able to reconcile and
fill in the blanks later. It’s faster, for me, than waiting for all the
information.
A CLEARING account
is used when we’re cleaning up accounts but due to the type of transactions, we
need an account to run transactions through. For example, if you have barter
transactions we would use the clearing account to post the income and expense
transactions. A clearing account is also very useful to clear AR and AP
transactions. Since QB does not allow multiple AR or AP accounts in one journal
entry, using a clearing account to post to can be a lifesaver. It’s a valid
work-around for some of the limitations we run into when using software.
The difference in the Suspense and Clearing accounts is that
the suspense account transactions will be changed to their proper account,
leaving no transactions in this account. In a clearing account, however, the
transactions will remain in the account but the account balance will be zero at
the end of the reporting period. QB uses Opening Balance Equity as a clearing
account when setting up a new file.
Most of us who do this every day have our own methods for
where we want to put these accounts in the chart of accounts, and what we call
them. Some of us like to keep them as an expense or income account, and as long
as the account is zero at the end of the reporting period, that’s fine. Others
like to put them on the balance sheet, so they’re very obvious. These accounts
should not be on the financial statements because they don’t tell us any useful
information, except that there issues that need to be resolved.
