Cancel a payable or a receivable

One of the expenses or revenues you recorded was never debited/credited to your account, so you want to reverse the accounting operation.

When can I cancel a payable or receivable

From a practical point of view, if you have reliable information that the payable or receivable will not be paid, you can cancel it.

For example, an issued check will not be debited after one year and eight days, but the debt or claim remains valid. You can also waive a debt for financial reasons (third party not solvent) or if it is a deliberate choice ("commercial" gesture).

In case of doubt, you can contact your accountant. 

Accounting logic of a payable/receivable cancellation

There are mainly two approaches:

• Reversal: the debt/receivable entry is canceled by making the opposite entry
  For example, the expense account used initially is credited for a debt
• Extraordinary revenue/expense: a revenue/expense of the same amount is recorded
  For example: for a debt, the bank account is credited

Recording a payable/receivable cancellation in the software

The recommended method is the reversal method: we will record an inverse entry, which we will then consolidate with the payable /receivable to settle it.

Record the cancellation entry

To record the cancellation of a payable, go to the Accounting > Book Entry > Revenue page. Reversing a payable will be done by registering an expense entry.

In the Account field, select refund/credit note. A new Select field will appear: select the account related to the entry to be canceled.

Please make sure to check the subsequent payment when recording the entry. This will create a receivable (payable to be reversed) or a payable (receivable to be reversed) that will need to be consolidated with the entry to be reversed to settle it.

Here are a few important points to remember when entering a cancellation:

• Unless it is a partial cancellation, the amount of the cancellation entry is the same as that of the entry to be canceled
• If a person is linked to the entry to be canceled, they must also be linked to the cancellation entry
• The account to be refunded is the one used in the entry to be reversed

Consolidating the entry to be canceled with the reversal entry

Once the reversal has been recorded, you must indicate to the software that it is canceling a particular payable/receivable entry. This is done by consolidating the entry to be canceled and the reversal entry.

We recommend that you consult the article consolidating payments for more explanations.

Once the two entries have been grouped:

• They are displayed in the details of the entry to be canceled (1 expense and one revenue of the same amount)
• The remaining amount to be paid will be equal to $0
• They will no longer be listed on the payables/receivables monitoring page.

To go further

We advise you to read the following articles related to the topics discussed above:

• Consolidating payments 
• Record an expense/revenue entry
• Edit or delete an entry