Accounting software like QuickBooks and Xero require all transactions involving currency exchange to be recorded in the Home currency set in your accounting system. Because of this, a clearing account is created to ensure proper tracking and reconciliation.
For example, if your Home currency is CAD and you convert USD to GBP, QuickBooks still requires the transaction to be recorded in CAD. This means:
A USD to CAD transaction is recorded as “Vault clearing from CAD”
A CAD to GBP transaction is also recorded as “Vault clearing from CAD”
This ensures that all foreign exchange transactions comply with the accounting software’s requirements while maintaining an accurate record of your currency conversions.