Correcting Accounting Errors

Created by Allison Cloyd, Modified on Mon, 14 Nov 2022 at 01:04 AM by Allison Cloyd

Overview

Everyone makes mistakes. In this article, we will show you how to correct a mistake you have found in an accounting transaction. This will involve either changing the transaction or reversing or deleting the transaction so it can be re-entered. We will explain what option you should do for each and how to do it.

This article will run through correcting non-trust accounting transactions, see Correcting Errors with Trust Transactions Broken Link Article if you want more information on that.

Also note that if you are integrated with QuickBooks Online or Xero, there may be further steps required for correcting a transaction. See QuickBook Online Integration - Correcting Errors Broken Link Article or Xero Integration - Correcting Errors Broken Link Article for more information on each.

 

Understanding when to edit, delete or reverse

Within Actionstep, you have three options available to correct a transaction. 

The first and easiest is to find the transaction (explained below), open it and edit it. If the transaction is newly entered this is the easiest method to use. 

Some transactions may be locked for editing. In this case, you will need to delete the transaction and re-enter it again correctly.

There can also be times when a transaction cannot be deleted. This happens in one of four scenarios:

  1. When the transaction has been included in a bank reconciliation
  2. When the transaction has been included in a sales tax return (GST, BAS, VAT)
  3. When the transaction falls into a lockout period
  4. When your Actionstep is set to not allow accounting transactions to be deleted

For these scenarios, you are able to reverse the transaction.

 

TIP: The lockout period and system setting that stop accounting transactions from being deleted are both found in Accounting Preferences and can be changed if you are an Actionstep Administrator.

 

Finding a previous transaction and opening it

Actionstep will keep a record of all transactions you enter. All transaction types (except General Journals, see below) will be found on the Banking transactions list. To access this, go to Accounting at the top of the Actionstep screen, then click on Banking and then click on the name of the bank account that the transaction was made under. 

 

TIP: To help find individual transactions, use the filter option to filter by transaction type, the date, amount and/or the contact involved.

 

Once you find the transaction in the list, click on the type of transaction to the left-hand side of the line that represents it to open that transaction.

If you only want to change some detail of the transaction, click and edit it and then use the Save button in the bottom right of the transaction window to save the changes.

 

correcting_acc_trans_-_Accessing_a_previous_trans.gif

 

NOTE ABOUT PRINTED CHECKS: If the transaction you are trying to void is a printed check, you will likely have to void the check first, before you are able to edit or delete it.  See How to Void a Check. Broken Link Article

 

Accessing General Journal transactions

You can access a list of all previously entered General Journals by going to Accounting at the top of the Actionstep screen, looking under the Accounts menu and selecting General Journal.

Click on the ID number of the Participant name to open the record.

 

Deleting a transaction

Once you find and open a transaction (see Finding a previous transaction and opening it above), you will see a Delete button in the bottom left-hand side of the transaction window. 

correcting_acc_trans_-_delete_-reverse.gif

 

 

Reversing a transaction

Reversing a transaction can be a preferred option for many users as it shows a clear audit trail of changes made. It is also a required process for some transaction types such as funds transfers and is required when you cannot delete a transaction. 

 

What is a reversal?

A reversal is where you create another transaction to cancel the first. You then re-enter the transaction again correctly. This will result in three transactions:

  1. Your initial transaction that had an error
  2. Your reversal transaction
  3. Your re-entered transaction without the error

It might help to think of a reversal as a negative transaction.

In a lot of transactions in Actionstep, there is a reverse function, a button that you can press instead of deleting a transaction. 

For the transactions that offer it, you will see the reversal button in the bottom left-hand corner of the transaction screen, next to the delete button.

 

Manual reversals

Even if there is not a built-in function to reverse a transaction, you can create a reversal manually by creating a transaction that cancels out the first transaction.

 

EXAMPLE OF A MANUAL REVERSAL

Anna has created a firm deposit of $5.32 for the interest that he earned on her business bank account. When reconciling, she notices that the amount she entered was incorrect and should have been $5.23 (she had entered the cents incorrectly).

 

To manually reverse this, Anna will create a firm withdrawal. The withdrawal will be dated the exact same date as the original incorrect entry and will be for $5.32, the exact same amount of the original incorrect transaction.

As she enters the withdrawal that will be the manual reversal, she takes care to enter a note or memo against the transaction that states:

  • That the transaction is a reversal transaction
  • The original transaction that is being reversed
  • The reason why the transaction is being reversed

Anna now re-enters the firm deposit again. She is using the same date but the correct amount of $5.23.

 

When Anna does her reconciliation, she will see three transactions similar to the example below:

Date Trans ID. Reason/Memo Amount Balance
    Opening Balance   $ 1,000.00
1 July 2021 Deposit 122 Interest earned from last month $   5.32 $ 1,005.23
1 July 2021 Withdrawal 255 REVERSAL: Correcting deposit 122. Incorrect amount entered. $  -5.32 $ 1,000.00
1 July 2021 Deposit 256 Interest earned from last month $   5.23 $    505.23

The first transaction is the mistake. You can see the section transaction cancels out the first. The last transaction is entering the transaction correctly.

When reconciling the above, Anna will reconcile all three transactions. The first two will cancel each other out and the last will match her bank statement.