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Set up a clearing account

by Intuit Updated 1 month ago

A Clearing Account is an account you use to move money from one account to another account when you cannot move the money directly. This account normally has a balance of $0.00 because you always take out the same amount that you put in. It may also be called a Barter or Wash Account.

The following are the common uses for a clearing account. If you have multiple uses for the account, you may want to create one for each.

Manage customers and AR

  • Manage accrual basis bad debt.
  • Move a Credit Memo from one job to another job under the same customer.
  • Transfer an amount from one A/R account to another AR account.
  • Allocate overhead expenses to customers or classes using a zero cheque.
  • Record one cheque that pays invoices to two customers.

Manage suppliers and AP

  • Move an amount from one AP account to another AP account.
  • Record a refund cheque from one supplier on behalf of another supplier.
  • Transfer a Bill or Bill Credit from one Supplier to another, e.g., bill consolidation.


  • Move foreign currencies without converting to your home currency.
  • Write off a receivable against a payable.
  • Record barter transactions with a company who is a customer and a supplier.

To set up a clearing account

  1. From the Lists menu, select Chart of Accounts.
  2. Right click anywhere in the Chart of Accounts, then select New.
  3. In the Add New Account window, select the Bank radio button.
    Note: While you can choose from several types of accounts, the best is a bank account because of the following reasons:
    • You can pay into a bank account via Receive Payments or Make Deposits.
    • You can pay out of a bank account via Write Checks or Pay Bills.
    • A bank account appears on the balance sheet and on the statement of cash flows to balances and changes in balances.
    • To allocate expenses to overhead or class using a zero cheque, you must use a bank account as your Clearing account.
  4. Select Continue.
  5. In the Account Name field, enter Clearing Account, Barter Account or Wash Account.
  6. Do NOT enter an opening balance.
  7. Select Save & Close.

To use a clearing account

  1. Create a journal entry.
  2. Add the AR or AP from which you are moving money.
  3. Add the Clearing account.
  4. Save the Journal Entry.
  5. Create a second Journal Entry.
  6. Add the Clearing Account.
  7. Add the AR or AP account to which you moving money.
  8. In either Pay Bills or Receive Payments, link the Journal Entries together.

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