Feature Request: Proper Reversal Entries for Journal, Payment, and Invoice Transactions

[tekticianIT]

📌 Summary

ERPNext currently lacks a true reversal mechanism for financial entries. While it supports cancellation and amendment, this approach does not comply with accounting practices for closed periods and audited financials, especially in public-listed or regulated environments.

This feature request proposes the addition of a dedicated Reversal functionality for Journal Entries, Payment Entries, and Sales/Purchase Invoices — without cancelling the original transaction.

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💼 Why This Is Important

• Cancellation = Change to Prior Period: The existing “Cancel and Amend” mechanism alters the original GL entries, which is not acceptable once books are closed or when financial statements are audited and submitted.

• Immutable Ledger Limitation: While ERPNext offers an immutable ledger option, it still doesn't address the need for posting a reversal in a future open period while maintaining audit trail integrity.

• Compliance Risk: For companies under audit, such as public-listed companies, changing prior-period transactions violates generally accepted accounting principles (GAAP) and statutory compliance.

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🎯 Proposed Features

The reversal functionality should:

1. ✅ Allow reversal of Journal Entries, Payment Entries, and Invoices (Sales & Purchase).

2. ✅ Post reversed entries in a user-selected open fiscal period, with references to the original transaction.

3. ✅ Preserve the original document and GL entry untouched — no cancellation, no amendment.

4. ✅ Allow each transaction to be reversed only once.

5. ✅ Mark reversed documents clearly, e.g., with a “Reversed” tag or status field.

6. ✅ Prevent reversed entries from being reconciled, e.g., in bank reconciliation, or matched against any other open item.

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🔄 Workflow Example

• User selects a posted Journal Entry dated 31-Dec-2023 in a closed year.

• Clicks “Reverse Entry” → New Journal Entry auto-generated with all debit/credit lines swapped, dated 01-Jan-2024.

• System flags the original as “Reversed”.

• Reversal is read-only, and cannot be deleted or matched.

• Audit trail is intact, and prior period remains unchanged.

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📊 ERP Systems That Support This

Other ERP solutions have well-established reversal mechanisms:

ERP System | Reversal Mechanism -- | -- SAP | FB08 — Reverses a document in a selected future period Odoo | Reverse button for journal entries + reconciliation lock Oracle NetSuite | Reversing journal entries with lock on prior periods Microsoft Dynamics | Void/Reversal with GL and reconciliation handling

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🚫 What Doesn't Work Today

ERPNext offers:

• Cancel + Amend — modifies original GL entries, unsuitable for closed periods.

• Immutable Ledger — prevents changes, but does not offer an alternative for correcting entries via reversals.

• Manual Journal Entry — requires manual creation and tracking, error-prone and lacks systemic enforcement of audit rules.

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✅ Why This Belongs in Core

• Broad Applicability: Affects all ERPNext users who generate accounting transactions.

• Enhances Compliance: Crucial for any company with statutory reporting, audits, or year-end close processes.

• Reduces Risk: Prevents accidental re-use or reconciliation of reversed entries.

📎 References
SAP Reversal Doc – FB08

Odoo Journal Entry Reversal

Microsoft Dynamics - Reverse Transactions