Payment Cancellations and Deferred Accrual Accounting

If a payment was responsible for transferring moneys from the holding distribution code to the payable distribution code, it stands to reason that if the payment is cancelled, it results in the reversal of this transfer from the holding distribution code to payable distribution code. If deferred accrual accounting is used and the payment is cancelled after the bill due date, the holding amounts that were transferred should remain booked.

Assume, for example, that the payment below was cancelled after the bill due date:

At cancellation, the above entry will be reversed, reinstating the balance in the holding account:

However, since the bill's due date has passed, the holding account needs to be booked. For open item accounts, the system comes with a customer class FT freeze algorithm (C1-PR-CA-RVS) that creates a bill review schedule for the affected bill, if one does not already exist. When the bill review batch process next runs, it checks the outstanding balance of the holding accounts on each SA linked to the bill and creates a settlement adjustment for each SA.

Note that this solution is only applicable to open item accounting where the bill matched to the payment can be determined. If balance forward accounting is practiced, the bill or bills that the payment applied to cannot be determined. In this case, the next bill review record created for the account as part of billing will cause the balances of the holding accounts to be analyzed and the settlement will catch up at that point.