---
title: "What is clearing account?"
description: "Clearing Account explained in plain English: definition, how it works, an example, and how it appears in QuickBooks and Xero."
url: https://ledgerbpo.com/glossary/clearing-account/
updated: 2026-09-11
publisher: LedgerBPO (SS Support Network LLC)
language: en-US
---

# What is clearing account?

Glossary

A clearing account is a temporary general ledger account used to hold transactions that are in transit between two states, such as a payment received but not yet applied, until they can be matched and moved to their final account.

Updated September 2026

## How clearing account works

Clearing accounts act as a holding area rather than a permanent home for a balance. A common example is a payment-processor clearing account, where deposits sit until they are matched against the settlement report and split into sales, fees and refunds. Ideally, a clearing account's balance returns to zero, or close to it, at the end of each period, which is the quickest way to confirm nothing is stuck in limbo.

A bookkeeper reviews clearing accounts regularly, since a balance that keeps growing usually means something is not being matched and posted correctly. Left unchecked, clearing accounts can quietly accumulate months of unreconciled activity that makes the balance sheet unreliable even though the bank reconciliation itself looks fine, since the account sits outside the normal bank-matching process.

## Example

A company routes every card payout into a clearing account first. During the month, $42,000 in payouts flow in, and the bookkeeper matches and reclassifies $41,500 of it into sales, fees and refunds based on settlement reports. At month-end, the clearing account carries a $500 balance representing a payout still waiting on documentation, which gets resolved early the next month.

## Clearing account in QuickBooks Online vs Xero

Both QuickBooks Online and Xero let a business create a clearing account as a regular bank-type or other current asset account. Neither software enforces a zero balance automatically; a bookkeeper has to review the account each close and investigate anything left sitting there past the normal cycle.

## Common mistakes

- Treating a clearing account as a permanent parking spot instead of reviewing and zeroing it out each period, which lets unmatched activity quietly pile up for months.
- Not investigating why a clearing account's balance keeps growing, which usually means transactions are not being matched correctly somewhere upstream in the payout or payment process.
- Using one clearing account for several unrelated types of in-transit items, which makes it hard to tell what is actually still unresolved inside the combined balance.

## Why it matters

A clearing account that never returns to zero can hide problems, such as unmatched payouts or mis-posted payments, behind a balance sheet that otherwise looks reconciled. For a growing business, an aging clearing balance is the first sign that a payment workflow needs attention before it becomes a bigger cleanup job. Keeping it reviewed every close gives an owner confidence that the balance sheet reflects reality, not unfinished matching work.

## Related terms

- [Suspense account](https://ledgerbpo.com/glossary/suspense-account/)
- [Undeposited funds](https://ledgerbpo.com/glossary/undeposited-funds/)
- [Reconciling item](https://ledgerbpo.com/glossary/reconciling-item/)
- [All terms](https://ledgerbpo.com/glossary/)

## How LedgerBPO handles clearing account

We set up and monitor clearing accounts for payouts and other in-transit items, reviewing the balance every close so nothing sits unresolved for more than a cycle. This keeps your balance sheet clean instead of accumulating unexplained holding balances over time.

[Balance-sheet accounts you can trust](https://ledgerbpo.com/services/account-reconciliation/)

Next step

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Source: https://ledgerbpo.com/glossary/clearing-account/ · Contact: https://ledgerbpo.com/contact/ · Full site map for agents: https://ledgerbpo.com/llms.txt