Credit Entries and Voided Checks Credit Entries and Voided Checks
There will be occasions when it is necessary to Undo the entry of an invoice or the printing of a check. When invoices and timesheets have been entered but not yet posted, it is a simple process to make changes to the pre-posted entry. However, when the posting has taken place, permanent changes have been made to various data files throughout the system. At this point there is no one-step process for altering the invoice or timesheet entry.
Restoring Backups and Keeping Logs
Of course, it is possible to restore a data file backup made prior to the posting and then make changes to the pre-posting Batch files. This is a simple process, and can be used in many instances.
Be careful when restoring backups, however. Remember that when restoring a backed-up version of the accounting system data, the clock is actually being set back to the very moment when the backup was made. Any processes which have been performed since the backup was made will disappear and will need to be redone.
For this reason, it is wise to keep some form of an entry log. This is usually a notebook into which the processes performed are written and at what date and time they occurred. If a backup is needed to restore, it is much easier to determine which processes must be redone.
If it has been quite a while since the last data backup was done, there may be more work done in the interim than is desirable. In this case, it may be less time-consuming to reverse the entry using a credit entry.
Making Credit (Reversing) Entries
Making credit entries in the accounting system is a simple, intuitive process. Credit entries can be made in the Accounts Payable, Accounts Receivable, and General Ledger modules.
By definition, a credit entry is simply the reverse of the original entry.
In the case of an Accounts Payable Subcontract or Retention invoice for $1,000.00, the credit entry is an A/P Subcontract or Retention invoice for -$1,000.00. If the invoice was charged to a job and cost code, the number of units can also be credited (i.e. -45 Square Feet).
In the case of an Accounts Payable Trade Invoice for $1,000.00, the credit entry is an A/P invoice for -$1,000.00. If the invoice was charged to a job and cost code, the number of units can also be credited (i.e. -45 Square Feet). If entering a line item on a Trade Invoice, put a negative quantity and a positive amount. For example: quantity= -1 amount = $1,000.00.
The net effect of putting a credit entry into the system is that an opposite transaction will be sent to all areas affected by the original posting. In the case of our $1,000.00 invoice, the original posting sent a credit to the Accounts Payable G/L account and a debit to the Jobs in Progress - Materials G/L account. It also created a $1,000.00 invoice in the A/P History file and added $1,000.00 to the cost to-date for the appropriate cost code in the Job Cost file.
When we post a credit entry, the system does not remove the original transactions from the respective files, but adds transactions which offset the first. In the case of our -$1,000.00 invoice, the system sends a debit to the Accounts Payable G/L account and a credit to the Jobs in Progress - Materials G/L account. It also creates a -$1,000.00 invoice in the A/P History File and subtracts $1,000.00 from the cost to-date for the appropriate cost code in the Job Cost file.
It is important to understand this concept. Placing offsetting entries into the respective data files not only fixes the problem, but leaves behind an easy to follow audit trail in the process.
Voiding Checks, Timesheets, Invoices and Receipts
One form of reversing entry is the automatic voiding of a payroll timesheets, paychecks, accounts payable checks, accounts payable invoices, accounts receivable invoices, or receipts. The process of voiding these entries in the accounting system automatically posts all the necessary reversing entries.