Date of loan transaction reversal


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Entity A has a loan facility with Lender A. Under this loan facility, an electronic payment is automatically arranged on a monthly basis from Entity A's cash account to the loan facility account.

If there are insufficient funds in Entity A's cash account at the time of the attempted electronic payment, the loan facility statement reports a reversal of the attempted payment - that is, both the automatic payment and the reversal of the automatic payment are reported on the loan facility statement.

These transactions are reported with different dates given the lag between the attempted electronic payment and the reversal following the failure of payment completion.

Given that there is no cash involved in either of these transactions and that the 2 transactions are related and cause no movement in the outstanding balance of the loan facility, how would these transactions best be recorded?

Should they simply be combined into a single transaction, with a debit to the loan facility account for the attempted payment being offset by a credit to the loan facility account for the reversal?

If so, what date would generally be considered most relevant given the different dates used? While the date used may not be particularly important if both occur within the same financial year, is there a best practice when attempted payment and reversal straddle a change of financial year?
 
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kirby

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Record your transactions on the day of their effective date. That is typically the day you submitted them unless you requested a later effective date. Do not net or you will create a bank recon nightmare
 

kirby

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Record the dishonored transaction on the date your bank returns the transaction
 

kirby

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Finally. Importantly. Know that some states are treating nsf ach payments same as bounced checks. So you may be in a lot if trouble. Best to fund your payments or not send at all
 
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Record your transactions on the day of their effective date.
In this case, the relevant dates would be those appearing on the loan facility statement.

Do not net or you will create a bank recon nightmare
What would be the entries for an attempted payment transaction that is later dishonoured/reversed?

Recording the attempted payment and reversal as 2 separate transactions accurately records the activity on the loan facility statement but would add 2 additional transactions that do not appear in the cash account from which payment was attempted.

If the CR side of the attempted payment or the DR side of the reversal are not recorded to cash (as though there were flows of cash), what type of account would be relevant?

The idea of combining (or netting) them was simply because I am unsure how to record them given no impact on the cash account.

Best to fund your payments or not send at all
Payments are automatically debited from the cash account by the receiving/lending institution. No payment sent by the borrower. Agree that payment should be funded, but in this case the borrower misjudged the timing of cash flows and paid late.

So the question relates to how best to record the lender's non-cash accounting entries that record the missed payment.
 

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