Balancing the Electronic Clearing Account when paying staff

Question

We run a shop with one casual employee, and make fortnightly pay runs to pay them. The way this is set up is that the pay run comes from our Electronic Clearing Account (an Assets account), which we then allocate to a specific Expense account for Employee Wages.

I think this is set up incorrectly, because I'm seeing the Electronic Clearing Account continually decrease below zero in value (so for example it's currently at -$4,000), when I believe it's supposed to be balanced to zero.

The expense account we assign the pay to is also increasing by the same amount (so is currently at +$4,000 but as an expense) - I think this is recorded as intended.

1. Should we change the pay run to draw the pay from the Employee Wages expense account directly, instead of the Electronic Clearing Account?

2. How can we balance the Electronic Clearing Account to zero?

Any help really appreciated!

princess_r · Answer

Hi wattleandbee,&nbsp;Welcome to the Community Forum! It's great to have you join us.&nbsp;The Electronic Clearing Account (ECA) is a temporary account used to record transactions before they are cleared in your bank account. When you make a pay run, the amount is deducted from the ECA and should be balanced out when you record the actual payment from your bank account to the ECA. If your ECA shows a negative balance, it suggests that there are transactions that have been recorded but not yet cleared.&nbsp;As for your question about changing the pay run to draw the pay directly from the employee's wages expense account, it's not typically recommended. However, every business is unique, and these are general guidelines. For specific advice tailored to your business, it's best to consult with your accountant. For more information, please refer to the Help articles and posts below that will provide you with some guidance in this matter:Set up payroll.Set up an electronic clearing account.The electronic clearing account should go back to $0.Feel free to post again if you need further assistance.&nbsp;If my response has answered your inquiry, please click "Accept as Solution" to help other users find this information.&nbsp;Cheers,Princess

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Balancing the Electronic Clearing Account when paying staff

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