How does Xero use the Tracking Transfers account?
If you use tracking categories, Xero uses the Tracking Transfers account to make sure the Balance Sheet balances when you filter it by tracking category. The amount in the Tracking Transfers account on the Balance Sheet for one tracking option is offset by the amounts in that account for the other tracking options.
How does the Tracking Transfers account work?
Xero creates journals in the Tracking Transfers account when you create a transaction or journal that affects a tracking category's balance, but you don't change the source transaction. This might happen when you:
Create a journal. For example, you create a journal to transfer part of the balance of the Cleaning account to Office Expenses (Northern tracking option), but you don't change the coding of the underlying bills.
Create a credit note for an invoice or bill with a tracking option on it.
What can I do with the Tracking Transfers account?
The Tracking Transfers account is a system account, so you can't archive or delete it. You also can't use it in transactions or manual journals.
Change its name and account code. This won't change how Xero uses the account.
Change its account type (not recommended).
If you want to change where the account appears on reports, customize your report layout instead.