Clearing – A business concept
Unravel the mystery behind clearing. Why we use clearing accounts. Find the relevance of word "Clearing" in business context.
In banking and finance,
Clearing denotes all activities from the time a commitment is made for a transaction until it is settled.
In trading, clearing is necessary because the speed of trades is much faster than the cycle time for completing the underlying transaction.
For example once a buyer agrees to buy, he can issue a cheque to the seller as proof of commitment. The seller need to get this cheque cleared through the banking system to turn the promise of payment into actual movement of money from one bank to another. This example is generally referred to as cheque clearing.
Some other examples of clearing are securities clearing, cash clearing etc.
Related Links
You May Also Like
-
The topic for this lesson is "Introduction to Cash Management Process". We start with the learning objectives for building requisite functional expertise in cash management process.
-
In automated clearing, Bank statement details are automatically matched and reconciled with system transactions. Learn how this process works and what are the perquisites to enable the same.
-
How the inflow and outflow of cash is linked to the operating cycles of the business? Learn the cash management process in an enterprize and it's key components.
-
Before we dive into cash management, let us fist understand what we mean by cash and what constitutes cash in context of cash management process.
-
Have you ever wondered what is actually a Bank Statement and why it is needed. What is the information that is available in a bank statement?
-
Although there is no straight forward answer to the question, how to best organize a treasury function, this article provides an generic view of the way large MNCs creates departments or sub-functions within the treasury function.
-
Learning objectives for this lesson are: Meaning of Order to Cash Process; Sub Processes under Order to Cash; Process Flow for Order to Cash; Key Roles & Transactions; Key Setups/Master Data Requirements.
-
The Cash Management component ensures that the enterprise has sufficient liquidity for payments that are due and to monitor payment flows. Learn how treasury plays an important role in cash management for the enterprise.
-
Bank Reconciliation is a PROCESS to Validate the bank balance in the general ledger With Bank Statement. Learn the bank recon process.
-
The Cash Clearing process enables you to track amounts that have actually cleared your bank. Till reconciliation happens the amounts are parked in 'Cash Clearing Account'.
