How do I use the Cash/AP Clearing Account?
The Cash/AP Clearing Account in Crunchafi’s Lease Accounting software is used to reconcile lease payments by posting lease invoices and payments through the clearing account in the Chart of Accounts, allowing the software’s monthly journal entries to offset and clear these amounts, as demonstrated by Bonnie’s example of recording, paying, and clearing a $5,000 operating lease invoice.
To record monthly journal entries to a clearing account, update Administration - GL Accounts with the GL Account that matches the Entity's Chart of Accounts.
Since Crunchafi’s Lease Accounting software is not an Accounts Payable system, lease payments are posted to the Cash/AP Clearing account. It is recommended to create an account in the Chart of Accounts that can be used to reconcile lease payments.
When making payments from your AP system, post the payment to the same account so the Journal Entry creates an offset (credit) to the AP amount (debit).
Example:
Bonnie posts her monthly rent invoice for the operating office lease to the clearing account. She records this as AP through her system which creates the following entry:
| Debit | Credit | |
|---|---|---|
| Clearing Account | 5,000.00 | |
| Accounts Payable | 5,000.00 |
Bonnie pays the invoice through her weekly check run which creates the following entry:
| Debit | Credit | |
|---|---|---|
| Accounts Payable | 5,000.00 | |
| Cash | 5,000.00 |
Bonnie records the monthly Journal Entry from the Lease Accounting Software for this operating lease which clears out the amount in the clearing account for this lease.
| Debit | Credit | |
|---|---|---|
| Operating Lease Expense | 5,000.00 | |
| ROU Asset | 4,621.45 | |
| LT Lease Liability | 378.45 | |
| LT Lease Liability | 5,075.79 | |
| ST Lease Liability | 75.89 | |
| Clearing Account | 5,000.00 |