Configuring Reversal Reasons

Accounting users may occasionally input incorrect data while creating general ledger accounting documents, necessitating their modification. Keeping a record of these modifications requires undoing the changes made to the incorrect document. After that, if required, they can repost a new document with the accurate entries.

Reversal reason codes categorizing the type of error made are mandatory to support the reversal process. The system is delivered with several reason codes that can be modified, or additional ones can be customized to meet each organization's specific requirements.

The implementation activity ‘Define Reasons for Reversal’ enables editing the reversal reasons, which are then shared across all company codes.

When creating a reversal reason, besides defining its code and a description, two settings should be considered:

• Negative Posting

• Alternative posting date

Negative posting activates an optional method of displaying reversal journal entries. It allows incorrect journal entries to be reversed without increasing the underlying debit and credit balances, as the incorrect journal and the negative postings sum up to zero.

The final result in the ledger is that when you correct a posted journal entry with a negative posting, a new posting is created on the same affected side with a minus sign.

On the other hand, a reversal without negative posting affects the balance on both the credit and the debit.

The use of negative postings is dependent on local regulations. To enable negative postings, the following prerequisites must be fulfilled:

• The company code permits negative postings

• The reversal reason must be configured to allow negative postings

Negative posting will be applied only when these two configuration elements permit it. Otherwise, the standard reversal posting will be applied.

By default, the reversal document will be posted on the same exact date as the erroneous document. In certain cases, this can lead to a problem. For example, if you need to correct a journal entry some months after it was entered, and the posting period is closed.

The alternative posting date indicator enables the user to modify the posting date manually in the reversal document to handle this kind of situation. Therefore, they will be able to choose a date in the currently open posting period.