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Ianinfinance's avatar
Ianinfinance
Experienced Cover User
4 years ago

General Ledger transactions when passing credits / reversing invoices

The following transactions appear when passing credits / reversing invoices: Sales and Receivables journal: Dr Sales $100 Dr GST collected $10 Cr Trade Debtors $110 No problem with that - perfec...
  • Mike_James's avatar
    Mike_James
    4 years ago

    Hi Ianinfinance , every accountable transaction in AccountRight creates a journal entry behind the scenes, so settling Credits in Sales, and settling Debits in Purchases, both create this journal. Apart from being a good audit trail, one good reason for having a journal is so that a transaction chain can be undone, for example an invoice partly credited and paid will involve 4 journals:

    - invoice

    - payment

    - credit

    - settle credit

    This chain can be undone if necessary by deleting from the most recent transaction as far back as necessary. This allows the transactions to be re-recorded correctly (if required).

     

    The display of history for any credit will therefore show the invoice which it was settled against, also useful to know/find.  

Mike_James's avatar
Mike_James
Ultimate Cover User

Hi Ianinfinance , that entry is created when a credit is settled against an invoice.

Ianinfinance's avatar
Ianinfinance
Experienced Cover User
4 years ago

Hi Mike

 I see that. What I want to know is why. Why debit and credit Accounts Receivable/ Debtors with the same amount? Having been a CA for close on 40 years,  It does not make accounting sense. Please explain the DR and CR of the asame amount. 

  • Mike_James's avatar
    Mike_James
    Ultimate Cover User
    4 years ago

    Hi Ianinfinance , every accountable transaction in AccountRight creates a journal entry behind the scenes, so settling Credits in Sales, and settling Debits in Purchases, both create this journal. Apart from being a good audit trail, one good reason for having a journal is so that a transaction chain can be undone, for example an invoice partly credited and paid will involve 4 journals:

    - invoice

    - payment

    - credit

    - settle credit

    This chain can be undone if necessary by deleting from the most recent transaction as far back as necessary. This allows the transactions to be re-recorded correctly (if required).

     

    The display of history for any credit will therefore show the invoice which it was settled against, also useful to know/find.  

    • Ianinfinance's avatar
      Ianinfinance
      Experienced Cover User
      4 years ago

      All good thank you

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