Transaction Voids Explained
When a transaction is voided, it creates a separate Transaction Void that will have its own journal entry, rather than modifying the original transaction that was voided. That is, the original transaction remains unchanged but is marked as "voided". The new void transaction generates reversing journal entries to accurately adjust your accounting balances.
This process ensures accuracy, especially for transactions occurring in closed accounting periods, preserving historical financial records without altering past balances.
Example Scenario:
Jan 31: Tenant pays $100 by check for rent. The bank account is debited $100, and rent income is credited $100.
Feb 5: Accountant reconciles and closes January financial records.
Feb 7: Check bounces (NSF). Accountant creates a transaction void dated Feb 7, crediting the bank account for $100 and debiting rent income for $100.
The original transaction remains listed but is offset by the void transaction, ensuring the current balance is correctly reflected.
Linked Deposits and Prepayments
If deposits or prepayment applications are associated with the voided transaction, these will automatically be voided as well. Only the relevant portions of combined deposits will be reversed.
This approach maintains accurate accounting while preserving the integrity of closed financial periods.