Immutable Ledger and effect on Bank Reconciliation

Immutable ledger is loved by auditors, and as discussed in various places it has caused confusion and concerns.

Here is what I have seen as a work around, though not liked by many accountants.

Scenario:
Payment received into bank was seen in bank statement on 3rd Jan 2020. The document was posted ACC-PAY-2020-00001.

  • Cr. Bank and
  • Dr. Debtor “ABC” as of 3rd Jan 2020.

This ACC-PAY-2020-00001 was required to be ammended for “Bank Reference” and selecting correct cost center on 15th Feb 2020. The transaction was cancelled and ammended with posting date 3rd Jan 2020. ACC-PAY-2020-00001-1
This created the following entries:
Cancellation of ACC-PAY-2020-00001:

  • Dr. Bank and
  • Cr. Debtor “ABC” as of 15th Feb 2020

Ammendment to ACC-PAY-2020-00001-1:

  • Cr. Bank and
  • Dr. Debtor “ABC” as of 3rd Jan 2020.

So during bank reconciliation statement and in “Bank Clearance”, it will show that on 3rd Jan 2020, two Cr. of Bank and will not match with closing balance till the 15th Feb 2020, when the cancelled Dr. of Bank will appear.

This confuses the bank reconciliation people as well as accountants, and not sure what would auditors interpret it as.

To avoid such confusions, one would pass a Journal Entry instead of Cancel and Ammend of ACC-PAY-2020-00001:
ACC-JV-2020-00001 as of 3rd Jan 2020

  • Dr Debtor “Correct Cost Center”
  • Cr. Debtor “Incorrect Cost Center”
    Leave a comment on the ACC-PAY-2020-00001 that the “Bank Reference” is incorrect.

As indicated by @Joseph_Marie_Alba1 in Philosophy, Ethics, Real Time Inventory and Immutable Ledgers, the reason for the Cancel and Ammend not favourable for bank reconciliation is that the cancellation date is set as posting date for the reversal transaction.

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Ignoring the is_cancelled transaction resolves the problem.

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