Debit Memo Reversals

Use debit memo reversals when you need to reverse a receipt, but you want to maintain the link between the billing activity and the payment.

When you create a debit memo reversal, Receivables reverses the receipt, but doesn't update any of the receipt activity associated with the original receipt.

Debit Memo Reversal Process

A debit memo reversal is different from a standard reversal because, instead of reopening the debit and credit items that were closed with the original receipt, Receivables creates one new receivable in the amount of the net of the closed debit and credit transactions. As a result, the reversed receipt shows the transaction as still applied.

You must create a debit memo reversal under each of these circumstances:

You're reversing a receipt from which you have created a chargeback, and this chargeback has had activity against it, such as another receipt, a credit memo, or an adjustment.
You're reversing a receipt with a remitted credit card refund application.
You're reversing a receipt (Receipt A) that was applied to another receipt (Receipt B), if the reversal would draw the balance of Receipt B negative.

Note:

You can't create a debit memo reversal for a miscellaneous receipt.

Debit Memo Transaction Types for Debit Memo Reversals

Create one or more transaction types to use for debit memo reversals. The debit memo transaction type provides the default receivable account distribution for the new debit item created when you reverse the receipt.

To create a debit memo transaction type:

Navigate to the Manage Transaction Types task.
Click the Plus (+) icon to open the Create Transaction Type page.
In the Transaction Type Set field, select a reference data set.
In the Name field, enter a name for this transaction type that identifies it for debit memo reversals.
In the Transaction Class field, select Debit Memo.
In the Transaction Status field, select Open.
Complete the remaining fields in the header section according to your requirements.
In the Reference Accounts section, click the Plus (+) icon to open the Create Reference Accounts window.
In the Business Unit field, select the applicable business unit.
Enter a Receivable, AutoInvoice Clearing, and Tax account.
The Receivable account provides the distribution for the debit item created when you create a debit memo reversal.
Save your work.

Reverse a Receipt Using a Debit Memo Reversal

If the receipt that you're reversing uses a receipt method with the Debit Memos Inherit Receipt Number option enabled, you can control whether the debit memo has the same transaction number as the original receipt. If the Debit Memos Inherit Receipt Number option isn't enabled, Receivables uses the predefined Debit Memo Reversal transaction source to determine the numbering for the debit memo reversal.

If you're using manual document numbering, enter a unique document number for this reversal. If you're using automatic numbering, Receivables assigns a unique document number to the new debit memo.

To reverse a receipt using a debit memo reversal:

In the Accounts Receivable work area, navigate to the Manage Receipts page.
In the Manage Receipts page, select the receipt you want and click the Edit icon to open the Edit Receipt page.
In the Edit Receipt page, select Reverse from the Actions menu to open the Reverse Receipt window.
Enter the reversal date, reversal reason, and reversal category.
Enable the Debit memo reversal option.
In the Type field, select a debit memo transaction type.
The Distribution field is populated with the Receivable account associated with the transaction type.
Enter the accounting date and click the Reverse button to reverse the receipt.
Navigate to the History tab in the Receipt Details section to review the details of the debit memo reversal.
The Debit Memo Number or Debit Memo Document Number column displays the number assigned to the debit memo transaction created for the reversal.

Accounting Entries for Debit Memo Reversals

To review the debit memo transaction created by the debit memo reversal:

In the Billing work area, navigate to the Manage Transactions page.
Search for the debit memo using the debit memo number.
In the Review Transaction page, the Debit Memo Lines tab in the Debit Memo Details section displays the details of the receipt reversal.

When you create a debit memo reversal, Receivables generates the line item from the predefined memo line. Receivables creates this line on the debit memo:

Debit memo for reversal of payment {PAYMENT_NUMBER}

where {PAYMENT_NUMBER} represents the original receipt number.

Receivables creates the accounting entries on the new debit memo transaction rather than on the original receipt. This ensures that you don't make duplicate entries, and eliminates the need for a clearing account.

With regular debit memos, AutoAccounting creates both the receivable and revenue account distributions. With debit memo reversals, the debit memo transaction type provides the receivable account distribution, and the cash account on the receipt is used as the revenue account distribution.

The cash account used depends on the status of the receipt at the time of the creation of the debit memo reversal. For example, if the receipt was remitted, then the cash account is the same as the remitted account assigned to the receipt method of the receipt.

When you create a debit memo reversal, Receivables creates these two entries:

The first entry decreases the cash account.

Receivables already recognized revenue on the original transaction. To avoid overstating the cash and revenue accounts, Receivables doesn't create an additional entry to revenue but instead assigns the cash account to the revenue line on the debit memo.
The second entry creates the new receivable.

When the original receipt was applied, Receivables closed the transactions and their associated receivables. You must therefore establish a new receivable to track the new debit item.