Reversals and Refunds can many times be very similar in that they’re both negative cash and negative net worth transactions. However, there is a basic difference between the two and it depends on context of the situation.
General rule to keep in mind: If the payment in question was deposited into the account, it would be a Refund. If it was not deposited, it would be a Reversal.
With regards to Compliance and how they appear on reports, we generally will show the Reversal Monetary Contributions on the Monetary Contribution schedule as a negative and the Refund with expenses. However, this will vary per agency, as some have specific schedules for either or both of these.
Reversed Monetary Contribution
In essence, this is like saying the Monetary Contribution didn’t really happen. For example, consider a bounced check. The check was deposited but the bank rejected it and the committee never actually received the money.
In order to create the Reversal, click on the transaction to view the details. At the top of the window click the Is Reversal box, then save. On the rare occasion you have Splits in a transaction and one of them requires a Reversal, update the transaction in the split’s individual record. When you return to the main transaction, you’ll then see options to set other splits in the transaction as reversals, as well.
This is similar to saying the Monetary Contribution happened but we took action to undo it. For example, the contribution exceeded limits so a refund check was sent back to the donor.
To add a Refund, locate the three dots (hot dog menu) to the right of the transaction from either the Register or within the Transactions section of the entity’s record. Click them and select Add Refund. A new window will appear and from there you can add the Refund details.