Clearing Account
Definition
A transit account used to hold amounts briefly while a transaction moves between systems or stages, such as undeposited funds or a payroll clearing account. By design it nets to zero once both sides of the transaction are posted.
Related Terms in Core Accounting
Petty Cash
A small cash float kept on site for minor expenses too trivial for a purchase order or card payment. Controlled with receipts for every disbursement and periodic replenishment back to the agreed float.
Imprest System
A petty-cash control method that fixes the float at a set amount and tops it back up by exactly the receipts presented. Because cash on hand plus vouchers must always equal the float, any shortfall is visible immediately.
Reconciliation
Comparing two independent records of the same transactions and resolving every difference, most commonly the accounting ledger against a bank statement. Reconciliation is what makes a balance trustworthy rather than merely recorded.
Intercompany Transactions
Transfers of goods, services, loans or cost allocations between entities under common ownership. Each entity records its own side, and the matching amounts must be eliminated on consolidation so group results are not inflated.
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