Unreconciling a Payment Entry Removes the Reconciliation Entry, Affecting Trial Balance

[parasonit]

Information about bug

When a payment entry is unreconciled, the original entry which is created after reconciliation is removed from the system, which causes an issue in the trial balance. This behavior is incorrect as it impacts the accuracy of financial reports. The system should create a separate cancellation entry on the same date to ensure that the trial balance remains accurate.

Below example shows the issue, We have posted the payment entry on 13/09/24 and reconciled it on 09/11/24. When we unreconciled it the entry posted on 09/11/24 is got removed and Trial balance get changed.

Steps to Reproduce:

1. Create a payment entry and reconcile it with an invoice.
2. Unreconcile the payment entry.
3. Check the trial balance or the related financial reports.
4. Notice that the original payment entry is removed, affecting the trial balance.

Expected Behavior: When a payment entry is unreconciled, the system should not remove the entry. Instead, it should create a separate cancellation entry on the same date to keep the trial balance accurate.

Actual Behavior: The payment entry is removed when unreconciled, which leads to discrepancies in the trial balance.

Module

accounts

Version

ERPNext: v15.41.1 (version-15)

Frappe Framework: v15.47.1 (version-15)

Installation method

None

Relevant log output / Stack trace / Full Error Message.

No response

[ruthra-kumar]

Internal Ref

[parasonit]

Clarification on Payment Reconciliation Entry and Trial Balance Impact
I would like to clarify the situation regarding the payment reconciliation for October 24 and its impact on the Trial Balance report.

1. Payment Reconciliation in October: When the payment reconciliation was posted on October 24, the system created a below GL entry:
   o Debit: Advance Account
   o Credit: Customer Account.
2. Freeze of October Period: After posting the reconciliation, the October period was frozen.
3. Issue Identified in November: Upon review in November, it was noticed that the payment was incorrectly reconciled with the wrong invoice.
4. Impact of Cancelling the Entry: To correct this, when we attempt to unreconcile the entry in November, the system automatically cancels the payment reconciliation entry created in October. This cancellation leads to an incorrect Trial Balance report. Specifically, the system shows the customer outstanding (asset) and the advance (liability) entries as open, which causes discrepancies in the report.
5. Proposed Solution: Instead of cancelling the entry from October, the correct approach would be to post a reversal entry in November. This reversal entry would involve:
   o Debit: Customer Account
   o Credit: Advance Account.
   This way, the Trial Balance report will remain accurate, reflecting the correct balances for both the closed period (October) and the current period (November).
6. Reason for Corrective Action: As we are required to submit the Trial Balance report to the bank every month, cancelling the entry in the closed period (October) would create discrepancies in the report, which could lead to confusion or errors in our financial reporting.
   I hope this clarifies the situation. Please let me know if you need further details or if there's anything else we should address.