The clearing commission account is a pass-through account and is intended only for the disbursement of commissions form the DA. It is not intended to be used for other entries outside of a DA. This account must ALWAYS have a zero balance at month end. It should also be zero after you process each deposit as the checks written should always match the amount placed in clearing commissions by the deposit.
Possible reasons for your clearing commission account being out of balance are:
- Missing Payments (checks) or Deposits
- Duplicate Payments or Deposits
- Incorrect Payments or Deposits
- "Random" entries to clearing commissions.
To determine where you are off follow these steps:
- Determine when the account went out of balance.
- Print a detailed trial balance report for the Clearing Commission account for the month in question.
- Look at the running balance of the account. After each deposit is processed you should see the account balance as zero. You should only need to look at transactions from the time after the last time the account was zero.
- Determine if it's the Debits, Credits, or Both
- Print a Deposit Summary Report.
- The Clearing column shows the total amount placed in the clearing commissions account from the deposits. This should equal the debits and credits on the detailed trial balance.
- Compare the activity from the detailed trial balance to determine which side of the account is off (or if both sides are).
Example: In this graphic we can see that both the debits and credits are off from what the activity should have been based on the deposit summary account.
NOTE: If you find an entry that is not part of the commissions disbursement process, determine a different account to make those entries in. If you find an entry you believe should be in clearing (for example, voiding a check from a prior period to re-issue), then that amount should be reflected in both the debit and credit amount. Add that amount to the Deposit Summary Report Clearing amount and go back through this entire process with newly calculated number as your target value for debits and credits in the clearing commission account.
Finding an error in the Credits:
- Calculate the difference to determine the amount you are looking for.
Example: In the graphic above the Credits are over by 7370.50. If the credits match, skip to finding an error in Debits.
- Start with the deposit entries. Compare the amount in the clearing commission from each deposit with the amount from the deposit summary report
- Do you see any duplicate entries?
- Do you see any missing entries?
- Do all the amounts in clearing commissions match the amount on the deposit summary account? Errors can occur when a deposit is imported and later modified without re-importing.
- Go back to the detailed trial balance report, do any of the transactions match the amount you are off by? Do you have any journal entries that are not part of the commission disbursements?
- Whether it be a single transaction or a couple that make up the amount, you must research why that transaction is there and determine the best way to handle it.
Example: Following with the example above we see a journal entry for some type reversal. Question, what is that? Should that be here? Should there be an offsetting entry? If it’s explainable. We add that to the amount on the deposit summary report and then we have our new target amount that both sides of the clearing commission should match. Once we can match the credit amounts we can move to checking the debits.
- Whether it be a single transaction or a couple that make up the amount, you must research why that transaction is there and determine the best way to handle it.
Finding an error in the Debits
- Calculate the difference to determine the amount you are looking for.
Example: In the graphic above the debits are off by under 676.33. If your debits are higher than the deposit summary report you have a potential over payment or duplicate payment. If your debits are lower on the deposit summary you have a potential missing payment.
- Review the detail trial balance for the clearing commission account
- Are there any "random" entries not related to commission disbursements?
- Question, what is that? Should that be here? Should there be an offsetting entry?
- Do you see any duplicate entries?
- Determine if there are any missing or incorrect entries?
- To do this you will need to compare each DA to the checks entered in clearing commissions.
- To compare payments you can either view each DA individually
-OR -
- Print the transmittal proof report to a file and import it into excel
- Instructions for importing are here
- Using Excel, calculate the difference between the check amount column and the Pay to KW column. This tells you how much should have been paid out.
- Instructions for importing are here
- To compare payments you can either view each DA individually
- Compare the amount calculated or the actual DA to the checks written to ensure the proper entries were made. You are looking any missing payments, incorrect payment amounts, or entries made that don't belong to a DA.
- To do this you will need to compare each DA to the checks entered in clearing commissions.
- Are there any "random" entries not related to commission disbursements?