Sometimes in business you pay suppliers, employees or refund customers and the payment leaves your bank account only to come back in a day or more later. This reversed payment is often because payment instructions weren’t correct.
Generally a rejected transaction by a bank would require a Journal entry to account for the rejected payment. This Journal usually has one side as the bank and account and the other as the account you wish to post the funds to until you retry payment. Often businesses use a “Asset: General Clearing” type account etc. to post these to until they make a new payment using this same account.
On the date the payment was rejected:
| Account | Debit | Credit |
|---|---|---|
| Asset: Bank Account | 100.00 | |
| Asset: General Clearing | 100.00 |
On the date the payment was re-tried:
| Account | Debit | Credit |
|---|---|---|
| Asset: Bank Account | 100.00 | |
| Asset: General Clearing | 100.00 |