clearing account in which BS category

[Former Member]

hi,

i know the income summary account in the example not needed also no issue.

my question now is how do i know this kind of account should be BS receivable or payable account? i mean when i create in COA.

i know that when it is debit balance then it is receivable whereas otherwise payable. like in this case is i think should be payable.

just like some of the clearing account. when debit balance it is BS receivable.

so my question is to know this kind of clearing account i should create under asset or liabilities category.

thanks

date acc dr cr

9/30 rev 1100

income summary 1100

9/30 income summary 1275

expenses 1275

9/30 retained earnings 175

income summ 175

[Former Member · Accepted solution]

Hi,

Basically you are creating a clearing account and ideally this should have a zero balance at month / year end. Hence, it not matter whether it is created as a Asset Account or a liability account. This question arises if there is a balance at year end and if it has a debit balance and it is created as a liability account.

Thanks

Murali.

[Former Member · Accepted solution]

hi,

i do not really get you. the clearing account should first be created in COA before double entry taking place, right? that is why not sure where to put it either asset or liabilities.

also your reply is confusing : " if it has a debit balance and it is created as a liability account."

debit balance = liabilities account?

thanks

[Former Member · Accepted solution]

Hi,

Yes a GL Account has to be created (in Chart of Accounts as well as Company Code) before a posting is made.

Normally if a Account has debit balance it is created as a Asset Account and if it displays Credit balance it is created as a liability account. For example Prepaid expenses is created as Asset Account. Accruals (payable) are created as Liability account.

What I meant is if a account is created as a Asset account and if it has credit balance, it will be confusing. Anyway you can ignore this point.

Thanks

Murali.

[Former Member · Accepted solution]

hi,

1) so which means we only need to use the right clearing account in COA. when debit balance, use receivable clearing acc whereas when credit balance use payable clearing account?

2) we need to create 2 different clearing account for the same purpose? 1 in asset another 1 in liabilities?

thanks

[Former Member · Accepted solution]

Hi,

No it is not required to maintain two GL Accounts. Whether it has to be a Asset / liability account depends on Business Process. Moreover, at month end / year end this account will be cleared and only a small balance will remain.

Thanks

Murali.

[Former Member · Accepted solution]

hi,

point given.

but i still have doubt. we first created the clearing account in COA before any posting. so where all these clearing account created under? they must be put under either asset or liabilities category, right?

thanks

[Former Member · Accepted solution]

Hi,

Check the GL Account in transaction code FS00 and see in the first tab - Type / description - Account Group. From this you will know whether it is a liability / asset account.

Thanks

Murali.