A reversal transaction for an incorrectly coded transaction
If a transaction hasn't been locked into a finalised GST return, it can be edited and corrected.
If a transaction has been locked into a finalised GST return, it can be edited as long as the Code amount and GST type stay the same as the original Code amount.
For example, the transaction below was coded to Animal Health and needs to be changed to Breeding Expenses.
Because the GST type (B) and the Code amount ($9016.00) won't change, the new code allocation can be saved.
When do I have to create a reversal transaction?
Once a transaction has been locked into a GST return, any corrections that will result in a change to the GST amount need to be done in a reversal transaction.
The reason for this is any changes to the original transaction will invalidate the GST return and it will no longer match what was filed with IRD.
SCENARIO: Angela has imported her bank transactions for March, including a payment to Farmlands. The entire transaction amount was coded to FW (Farm Working) and then locked into a final GST return. It now needs to be corrected to include any personal GST items.
How to create a reversal transaction to correct a code
1. Find the incorrect transaction
Note down the transaction details i.e. date, amount and what code(s) were used.
2. Create the reversal transaction
The reversal amount should be the opposite of the incorrect transaction while the date and codes used mirror the original details.
- To correct an expense transaction, click on the Income button at the top of the Transactions screen.
- Enter the same Date, Amount and Other Party details as the original transaction.
- Record the same category and extended codes that were allocated to the original transaction.
- Record a clear note that explains the reason for the reversal transaction.
- Click Ok to save the new transaction.
3. Create the correct transaction
Follow Steps 1 - 5 above to create the correct transaction, making sure to use the correct transaction type (income or expense).
For multi-lined transactions, you can either manually split the transaction into multiple line amounts or import your trader statement into the transaction.
Don't forget to...
Reconcile all transactions. This helps to keep your database tidy and will let you close the current financial year once the new year rolls around.
Don’t worry though, reconciling them won’t affect your accounts. This is because, though there are 3 transactions in total, two will zero each other out leaving the 'true' amount as reflected on your bank statement.
How will this affect my GST?
Two transactions will be pulled into the next GST report, the reversal transaction and the correction, so that the GST portion can be claimed correctly for the business. The previous GST report remains unaffected by the reversal transaction.