Tag Archives: Cancel Transaction

Should I use a credit note or cancel the transactions?

You have two options, credit note and cancel the transaction, to reverse an entry in MoneyWorks. Which method is better or rather when to use them?

Credit note

A credit note (a.k.a. Adjustment Note) is a document, usually for returns of goods or adjustments to past invoices. 

Assuming you issue an invoice to a customer. Then, due to an issue with the product sold, the customer has returned the goods, and you give a credit note to the customer to offset the amount owed.

How to enter a credit note in MoneyWorks?

You prepare an invoice (from the Show menu > Transaction > Sales Invoice) and click on the Reverse button to convert the sales invoice to a credit note. The credit note shows a negative quantity and extended price. 

Credit Note

The journal behind the sales invoice transaction:

    Debit Receivable account
        Credit Sales
        Credit GST Output
    Debit Cost of goods sold
        Credit Inventory assets

And the credit note will reverse the entry by:

    Debit the Sales
    Debit GST Output
        Credit Receivable account
    Debit Inventory assets
        Credit Cost of goods sold

Use the credit note to offset future invoices or the ‘Send refund to debtor’ function (from the command menu) if the customer has already paid the invoice.

Cancel transaction

The cancel transaction process in MoneyWorks is for reversing a wrong entry. 

To cancel a transaction:

  1. Highlight the entry.
  2. Go to the command menu, adjustment, then select cancel transaction feature.
Cancel transaction

Cancel a transaction will not remove it from the database. Instead, MoneyWorks create a reverse entry to offset the original.

Assuming you recorded payment (or purchase invoice) for utility expense twice, you may use a cancel transaction method to cancel the duplicated entry.

Although cancellation does a similar reversal as the credit note, you should not use cancellation for goods return or adjustment of invoices. Let’s say you use the cancel transaction method for goods returned from a customer, the journal behind the cancellation:

    Debit Sales
    Debit GST Output
       Credit Receivable account
    Debit Inventory assets
       Credit Cost of goods sold

Although it looks identical to a credit note, cancellation (and the cancelled invoice) will not show in the GST report. Therefore, you should consider using a credit note instead so the sales invoice and the adjustment shown in the GST report. Also, consider using a credit note instead of cancellation if both transactions are in a different financial period or cross between two GST cycles. 

You may consider adding a note (click add note button in the transaction) or a short memo in the description to indicate cancellation and wrong entry (and you may also change the transaction colour to facilitate future searching).

Those users, who understand coding, may consider adding a heading column into the transaction list with the formula:

    !testflags(flags, #3)

The test flags give a value of 0 or 1. 

The result ‘0’ indicate cancellation and a ‘1’ for a valid accounting entry.

In short, use the cancel transaction method for a wrong entry and credit note for all other reversals. Use credit note if you are confused between the two.

Cancel Transaction

Posting is a fraud control feature in MoneyWorks to prevent editing once the account has finalised. You cannot modify the transaction once posted. However, you can use the Cancel Transaction feature (from the Command menu) to correct the error.

Cancel Transaction in MoneyWorks
Cancel Transaction

By cancelling, it does not delete the transaction. Instead, it creates a reverse entry to correct the mistake.

For example, you entered a purchase invoice twice. You can use the cancel transaction method if the error is still within the current period. What the system does is that it creates a reverse transaction to correct the duplicate error.

Correct duplicated error
Correct duplicated error

However, if the mistake is fall in the past period, then you should consider entering a credit note or journal in the current period to correct an error made in the past.

How to hide cancelled entries from the transaction list in MoneyWorks accounting solution?

Software: MoneyWorks accounting solution

MoneyWorks creates a reversed entry if you try to ‘cancel’ a posted transaction. For example, you have wrongly recorded a sales invoice and posted it accidentally. MoneyWorks created a reversed sales invoice instead of removing it from the sales invoice list once you ‘cancelled’. It leaves an audit trail in the ledger, showing both the positive and negative sales invoice contra against each other; this prevents intentional manipulation of financial data. MoneyWorks is a better accounting system for small businesses in preventing accounting fraud.

MoneyWorks Cancelled entries

You can change the colour (such as red colour) of the cancelled transaction to reduce confusion.

Change colour

You can also temporarily hide the cancelled transactions (in Red) from showing (it still in the ledger) by adding a filter to the transaction list. Add the expression to the calculation box of the filter:

Colour <> “Red”

The ‘Colour’ is referring to the colour field of the transaction and ‘< >’ is ‘Not Equal to’.

Filter.png

Then, turn on the filter as and when you need to omit cancelled transaction from the list.

show filter.png

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