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Gateway sales are posted straight to the bank at gross value, so the bank ledger never agrees with the statement and fees, GST on fees and refunds are lost in the gap.
Post every captured sale to a payment-gateway clearing account, then when the settlement arrives debit bank for the net credit, debit gateway charges and input GST for the fee lines, and credit the clearing account for the gross.
One clearing ledger per gateway, a gateway charges expense ledger, input GST ledgers, and the gateway's settlement report and monthly tax invoice as source documents.
A clearing account that falls to zero for every settled cycle, with any month-end balance explained by in-transit sales, refunds, chargebacks or holds.
To record a payment gateway settlement, book each sale to a payment gateway clearing account when the customer pays. When the settlement reaches your bank, debit the bank for the net amount, debit gateway charges and input GST for the fee, and credit the clearing account for the gross. Once a cycle has fully settled, the clearing account should come back to zero.
That is the whole idea. The rest of this page shows the entries in the debit and credit form used in Tally, Zoho Books or any other ledger.
The entries at a glance
| Event | Debit | Credit |
|---|---|---|
| Sale captured by the gateway | Gateway clearing account | Sales (or customer) |
| Settlement received in bank | Bank account | Gateway clearing account |
| Fee on the settlement | Payment gateway charges | Gateway clearing account |
| GST on the fee (18 percent) | Input GST (IGST or CGST + SGST) | Gateway clearing account |
| Refund to a customer | Sales returns (or customer) | Gateway clearing account |
| Chargeback debited | Chargeback receivable or loss | Gateway clearing account |
In practice the settlement, fee and GST lines are usually one compound journal, because they arrive together.
What is a gateway clearing account and why not post sales straight to the bank?
A clearing account is a temporary ledger, shown under current assets, that holds money owed to you by the gateway. Think of the gateway as a short-term debtor.
When a customer pays ₹1,000 by card on your website, the money does not reach your current account that minute. The gateway collects it into an escrow account with a bank, deducts its fee, and pays you later, often a day or two after the payment (T+1 or T+2, where T is the transaction day). If you post the ₹1,000 straight to the bank, your bank ledger will show money the bank statement does not. Your bank reconciliation will then carry dozens of small differences every day.
With a clearing account, the bank ledger only moves when the bank actually moves. The gap between gross sales and net credits sits in one place, where you can explain it.
Worked example: ₹1,00,000 of sales
Suppose your shop captures ₹1,00,000 of card payments on 3 October. The gateway charges an illustrative 2 percent fee, which is ₹2,000, plus GST at 18 percent on that fee, which is ₹360. The total deduction is ₹2,360, so the bank receives ₹97,640 on 5 October.
Entry 1 (3 October, sale captured)
- Dr Gateway clearing account ₹1,00,000
- Cr Sales ₹1,00,000
Entry 2 (5 October, settlement received)
- Dr Bank account ₹97,640
- Dr Payment gateway charges ₹2,000
- Dr Input GST ₹360
- Cr Gateway clearing account ₹1,00,000
Check: ₹97,640 + ₹2,000 + ₹360 = ₹1,00,000. Debits equal credits, and the clearing account is back to zero.
If the sales figure includes output GST on your own goods, keep that in your normal sales and output tax entries. The clearing account only cares about the gross amount the customer paid.
Entry 3 (if a ₹1,500 refund is deducted from the next settlement)
- Dr Sales returns ₹1,500
- Cr Gateway clearing account ₹1,500
The next settlement will then be ₹1,500 lower than its sales would suggest, and the clearing account explains why.
What should the clearing account show at month end, and what does a leftover balance mean?
At month end the balance should equal sales that have been captured but not yet settled. If your cycle is T+2, that is roughly the last two days of sales. For example, if 30 and 31 October together brought ₹48,000 of sales, a ₹48,000 debit balance on 31 October is normal.
A balance that is larger, older or negative needs a look:
- Older than the settlement cycle: a settlement may be missing, delayed or on hold.
- Credit balance (negative): refunds or chargebacks have been booked but the matching sales sit elsewhere, or a settlement was posted twice.
- Small odd amounts: fees or GST at a different rate than you assumed, or rounding.
Your GST team will also want the gateway’s monthly tax invoice. Match its total fees and GST to the fee and input GST you posted for the month.
When will the clearing account not clear to zero?
At low volume you can tie each settlement to its sales by hand. Once you have hundreds of payments a day, refunds from older cycles and split credits, the clearing account stops clearing neatly. The fix is to break each settlement into order-level lines and match those, which the guides below walk through.
What to read next
- Next in this series: Platform settlement decomposition in Google Sheets
- PayU settlement reconciliation, a walkthrough of a nodal credit
- Payment gateway reconciliation
Payment-gateway settlement reconciliation is on the TransactIG roadmap.
Content authored by practitioners with experience at Amazon India, Intuit QuickBooks, and the Tata Group. Meet the team →