What is a clearing account in simple terms?

It is a temporary holding account that money passes through on its way from one place to another, for example from an Amazon settlement to your bank. You book all the detail into it, then move the net cash out. When the balance returns to zero, you know everything reconciles.

What type of account is a clearing account?

On the balance sheet a clearing account is usually a current asset, though it can be a current liability depending on how it is used (a payroll clearing account often holds liabilities). It is never an income or expense account, because the value only passes through it temporarily.

Why do I need a clearing account for Amazon?

Amazon pays you the net of a settlement, so a single bank deposit hides dozens of sales, fees, and refunds. A clearing account lets you book all of that detail to the right accounts while still tying the deposit out to the bank, which keeps your revenue and COGS accurate.

Should my clearing account balance be zero?

After every payout reconciles, yes. A non-zero balance at month-end is fine only if it represents a deposit genuinely in transit or a settlement that crosses the period boundary. Any other lingering balance points to a miscoded fee, a missed reserve, or a refund booked incorrectly.

Is a clearing account the same as a suspense account?

They are close cousins. A suspense (or suspense clearing) account parks transactions you cannot yet classify, while a clearing account holds transactions you intend to move in full once a matching event occurs, like a bank deposit. Both should be emptied regularly.

How do I set up a clearing account in QuickBooks Online?

Add a new account under Bank or Other Current Asset, name it after the specific payout source, and leave the bank feed disconnected. Post your settlement journal so the net lands in that account, then match the real deposit against it. Sellers using quickbooks for amazon sellers through a connector usually have this created automatically, but check the account type and the name, because a default name like 'Clearing' becomes useless the moment you add a second channel.

Does a clearing account work the same way in Xero?

Yes, with different labels. Create a current asset account, post the settlement journal to it, and reconcile the bank deposit against the balance. Xero's reconciliation screen makes the match straightforward once the journal is right. If you use an amazon xero connector, confirm it posts a balanced journal per settlement rather than a lump-sum bank transaction, because the lump sum defeats the purpose.

What is the best accounting software for handling settlements this way?

There is no single winner, only a checklist. The tool should post one summarized, balanced journal per settlement, map every fee type to a named account, put the net in a per-channel clearing account, split settlements that cross a period boundary, and let you re-post if a mapping changes. A2X, Link My Books, and BeanHawk all do settlement-to-clearing work, and they diverge on inventory valuation, multi-account support, and reimbursement recovery. Pick based on which of those you actually need, not on the settlement feature, since that part is table stakes.

Glossary

What is Clearing account?

A holding account that nets marketplace activity against bank deposits for clean reconciliation.

A clearing account is a temporary holding account in your chart of accounts that sits between marketplace activity and your bank. Instead of dumping each Amazon deposit straight into sales, you book the full settlement, every sale, refund, fee, and adjustment, into the clearing account, then move the net cash to it when the payout actually hits the bank. When the clearing account zeroes out, you know your books match reality. That is the whole point of a clearing account in accounting: it gives you one place where marketplace gross activity and net bank deposits have to reconcile.

If you have ever wondered what a clearing account is and why your bookkeeper insists on one for Amazon, the short answer is that marketplace payouts are net of dozens of line items, and a bank feed only shows you the lump sum. A clearing account (sometimes called a cash clearing account or an Amazon holding account) breaks that lump sum apart so revenue, fees, and refunds each land in the right place while the deposit still ties out to the penny.

The concept is old and boring, which is a compliment. Accountants have used clearing accounts for decades wherever the timing of an economic event and the timing of the cash differ. Ecommerce just makes the gap bigger and noisier.

What is a clearing account in accounting?

A clearing account is a real account on your balance sheet, usually classified as a current asset or, depending on how you use it, a current liability. It holds value only briefly. Money flows in from one source and out to another, and the goal is for the balance to return to zero (or to a known in-transit amount) once everything has been booked.

Clearing accounts are not unique to ecommerce. Payroll clearing accounts hold gross wages and withholdings until the payroll run settles; suspense and collection clearing accounts park transactions you cannot yet classify. For Amazon and multichannel sellers, the most useful version is a settlement clearing account that absorbs an entire payout statement before the cash is reconciled against the bank.

Other clearing account examples turn up all over a normal set of books. Undeposited funds is a clearing account by another name, holding customer payments until they land in a bank deposit. An inter-company clearing account holds transfers between two entities you own until both sides book them. A card-processor clearing account holds a day's gross charges until the processor pays you net of its fee. Same pattern every time: an economic event happened, the cash hasn't caught up, and you need somewhere honest to park the difference.

•Account type: typically a current asset (or current liability) on the balance sheet.
•Purpose: temporarily hold transactions until they are reconciled or reclassified.
•Healthy state: nets to zero (or a known in-transit balance) after every cycle.
•Common variants: settlement/Amazon clearing, payroll clearing, cash clearing, suspense clearing.

How an Amazon settlement clearing account works

Amazon pays you the net of a settlement period: product sales, minus referral fees, FBA fees, refunds, reserves, advertising, and more. If you book the bank deposit as revenue, your sales are understated and every fee disappears from your P&L. A clearing account fixes this by separating the accounting entry from the cash entry.

First, you record the full settlement against the clearing account: credit sales income, debit each fee and refund category, and the net of those entries equals the payout amount sitting in the clearing account. Then, when Amazon's deposit lands in your bank, you transfer that amount out of the clearing account. If the transfer empties the account, your books reconcile. A lingering balance means a fee was miscategorized, a reserve was missed, or the settlement spans a period boundary, all of which are exactly the errors a clearing account is designed to surface.

•1. Book the full settlement into the clearing account (sales, fees, refunds, reserves, ads).
•2. The clearing account balance now equals the expected payout.
•3. The bank deposit arrives and is matched against the clearing account.
•4. Transfer the deposit out; the clearing account returns to zero.
•5. Any residual balance flags an error or a settlement that straddles two periods.

A worked example: one settlement, start to finish

Say a two-week Amazon settlement contains $18,400 of product sales, $920 of customer refunds, $2,760 of referral fees, $2,300 of FBA fulfillment fees, $1,150 of advertising charges, and $1,500 held back as a reserve. Amazon deposits $9,770.

Book the whole thing at once. Sales income is credited $18,400. Refunds are debited $920, referral fees $2,760, fulfillment fees $2,300, advertising $1,150. The reserve is not an expense, so it goes to a separate reserve account (or stays in clearing as a named balance) for $1,500. What is left in the clearing account after those entries is exactly $9,770.

A day or two later the bank feed shows a $9,770 deposit. You match it against the clearing account and the balance drops to zero. Your P&L now shows $18,400 of gross revenue and $6,210 of marketplace costs instead of a single mysterious $9,770 line, which means your gross margin is finally computable.

Now the failure mode. Suppose you missed the reserve entirely and booked only the fees. Your clearing account would show $11,270 expected against a $9,770 deposit, leaving $1,500 stranded. That stranded balance is the alarm bell. Without a clearing account you would never see it, because the bank deposit always agrees with itself.

Two details decide what belongs in the entry at all. Anything Amazon deducts from the payout runs through the clearing account, and that includes charges people forget are there: the monthly subscription for a Professional seller account, storage and long-term storage fees, coupon redemption charges, and any chargeback. Anything you pay Amazon by card, on the other hand, never touches this account. Supplies bought through an Amazon Business buying account are a normal card expense and should be coded straight to inventory or operating expense, because routing them into settlement clearing creates a balance that will never clear.

Those figures are invented to show the mechanics. Real settlements carry many more line types, and the specific fee categories change over time, so build your mapping from the settlement report itself rather than from a list you copied once.

Clearing accounts on the balance sheet

Because a clearing account holds value temporarily, it lives on the balance sheet, not the profit and loss statement. A settlement clearing account usually shows up as a current asset (money owed to you that has been earned but not yet deposited) or flips to a liability if Amazon is in a net-reserve position. The key discipline is reviewing the balance at month-end: a non-zero clearing account at period close is money in transit, and you should be able to name exactly which settlement it represents.

A clearing account that never zeroes out is a warning sign. Drift usually means fees are being coded inconsistently, refunds are being netted against sales instead of booked separately, or settlements that cross a month boundary are not being split. Reconciling the clearing account is how you catch those problems while they are still small, rather than discovering a five-figure variance at year-end.

Build the review into your close checklist. Open the clearing account register, sort by date, and look at anything older than one payout cycle. Every aged item should have a one-sentence explanation. If you cannot write that sentence, you have found your first real bookkeeping problem of the month.

One clearing account per channel, not one for everything

Sellers who run more than one channel often start with a single 'marketplace clearing' account and regret it within a quarter. The moment two payout sources share an account, a stranded balance stops telling you where the problem is. Give each payout source its own clearing account: Amazon US, Amazon CA, eBay, Shopify Payments, Etsy, and any payment processor that pays you net of fees.

The mechanics are identical across channels, only the fee names change. eBay nets its final value fees and ad fees out of each payout, so ebay accounting software has the same job to do: split the gross into sales and fees, park the net in a clearing account, and match the payout. Shopify Payments does the same with processing fees and chargebacks, and if you also take PayPal or Shop Pay Installments, each of those is its own clearing account because each pays on its own schedule.

One registration detail matters more than it looks. The clearing mechanics are identical whether your eBay account is a personal one or a business one, but the entity behind the payout is not: an individual account reports to your SSN and pays into your personal bank, while an eBay business account reports to your EIN and pays the company. If the books you are reconciling belong to an LLC or a corporation, register the account as a business account so the payout, the 1099-K, and the clearing entry all describe the same taxpayer. Untangling that after a year of mixed payouts is genuinely miserable.

Stripe and PayPal deserve a special mention. Both hold balances that you can spend or withdraw, so their clearing accounts frequently carry a real, intentional balance rather than zeroing out. That is fine as long as the balance in your books matches the balance in the processor's dashboard on the same date.

Setting up a clearing account in QuickBooks or Xero

In QuickBooks Online you add a clearing account as a Bank or Other Current Asset account, give it a clear name like 'Amazon Settlement Clearing,' and never connect a live bank feed to it, the whole point is that you control what flows through. In Xero the equivalent is a current asset account, often paired with a dedicated tracking setup so you can reconcile marketplace deposits against the clearing balance. Many sellers run one clearing account per marketplace (Amazon US, Amazon CA, eBay, Shopify Payments) so each payout source reconciles independently.

Name accounts so a stranger could read your balance sheet. 'Clearing 2' tells nobody anything. 'Amazon US Settlement Clearing' tells your accountant, your future self, and eventually a buyer's diligence team exactly what they are looking at.

This is where automation earns its keep. Manually splitting every settlement into a clearing account is tedious and error-prone across hundreds of line items. BeanHawk posts each Amazon settlement into a clearing account automatically, with fees, refunds, and reserves coded correctly, so the deposit matches the bank feed and the clearing account zeroes out on its own, leaving you cash-accurate, accrual-correct books without the manual journal entries.

If you are shopping the category, the clearing-account behavior is the single best test of a tool. Any amazon accounting software worth paying for should post a summarized journal per settlement, land the net in a clearing account, and refuse to post an entry that does not balance. The same test applies when you connect shopify to quickbooks or set up an amazon quickbooks integration: ask the vendor what happens to the clearing balance when a settlement straddles month-end. A vague answer is your answer.

Compare a few. A2X and Link My Books both built their reputations on exactly this settlement-to-clearing workflow, and for a single-channel seller who only needs clean journals, either can be the right call. The reasons to look further are usually inventory valuation, multi-account consolidation, or wanting reimbursement recovery in the same system.

Common clearing account mistakes

Almost every broken clearing account traces back to one of a handful of habits.

The last one is the most expensive in the long run. A clearing account only tells you the truth if you look at it, and the whole value of the technique is the alarm it raises when something has been coded wrong.

•Connecting a bank feed to the clearing account, which lets transactions in through the back door.
•Booking the deposit as revenue and the settlement detail as well, double-counting sales.
•Netting refunds against sales instead of recording both, which flatters gross revenue.
•Treating reserves as an expense rather than a balance sheet item.
•Sharing one clearing account across several channels, so a stranded balance has no obvious owner.
•Splitting a month-end settlement by guesswork rather than by transaction date.
•Never reviewing the register, so drift accumulates quietly for four quarters.

When you do not need one

Honest caveat: a clearing account is overhead. If you sell on one channel, do a few dozen orders a month, run on cash basis, and your accountant is comfortable with a simpler split of each deposit, you can categorize deposits directly and be fine. The technique earns its keep once payouts get large enough that a miscoded fee category costs real money, or once you have more than one payout source and need to know which one is off.

The other trigger is anyone else reading your books. Lenders, accountants doing a review, and acquirers all expect gross revenue and marketplace fees to be visible separately. A clearing account is the cheapest way to get there and keep it there.

Frequently asked questions

What is a clearing account in simple terms?: It is a temporary holding account that money passes through on its way from one place to another, for example from an Amazon settlement to your bank. You book all the detail into it, then move the net cash out. When the balance returns to zero, you know everything reconciles.
What type of account is a clearing account?: On the balance sheet a clearing account is usually a current asset, though it can be a current liability depending on how it is used (a payroll clearing account often holds liabilities). It is never an income or expense account, because the value only passes through it temporarily.
Why do I need a clearing account for Amazon?: Amazon pays you the net of a settlement, so a single bank deposit hides dozens of sales, fees, and refunds. A clearing account lets you book all of that detail to the right accounts while still tying the deposit out to the bank, which keeps your revenue and COGS accurate.
Should my clearing account balance be zero?: After every payout reconciles, yes. A non-zero balance at month-end is fine only if it represents a deposit genuinely in transit or a settlement that crosses the period boundary. Any other lingering balance points to a miscoded fee, a missed reserve, or a refund booked incorrectly.
Is a clearing account the same as a suspense account?: They are close cousins. A suspense (or suspense clearing) account parks transactions you cannot yet classify, while a clearing account holds transactions you intend to move in full once a matching event occurs, like a bank deposit. Both should be emptied regularly.
How do I set up a clearing account in QuickBooks Online?: Add a new account under Bank or Other Current Asset, name it after the specific payout source, and leave the bank feed disconnected. Post your settlement journal so the net lands in that account, then match the real deposit against it. Sellers using quickbooks for amazon sellers through a connector usually have this created automatically, but check the account type and the name, because a default name like 'Clearing' becomes useless the moment you add a second channel.
Does a clearing account work the same way in Xero?: Yes, with different labels. Create a current asset account, post the settlement journal to it, and reconcile the bank deposit against the balance. Xero's reconciliation screen makes the match straightforward once the journal is right. If you use an amazon xero connector, confirm it posts a balanced journal per settlement rather than a lump-sum bank transaction, because the lump sum defeats the purpose.
What is the best accounting software for handling settlements this way?: There is no single winner, only a checklist. The tool should post one summarized, balanced journal per settlement, map every fee type to a named account, put the net in a per-channel clearing account, split settlements that cross a period boundary, and let you re-post if a mapping changes. A2X, Link My Books, and BeanHawk all do settlement-to-clearing work, and they diverge on inventory valuation, multi-account support, and reimbursement recovery. Pick based on which of those you actually need, not on the settlement feature, since that part is table stakes.

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