Dealing with rejected bank transfers

1

Hi
Recently had several EFT’s that were rejected by the bank due to incorrect account details. Because they appear in the statements they are imported and part of the bank rec. Up till now I have just entered them an made notes regarding the reason and was happy. But after pondering it I am wondering if this will create a GST anomaly or is it cancelled out with the GST being on both the payment and the refund? What would be the best practice for these transactions?

2

Your question is not clear. If the transfers were rejected, why do they appear on the bank statement? A bank transaction that is rejected for incorrect details does not exist from an accounting perspective. You should just delete it if it has already been entered manually and replace it with whatever you did to complete the transaction. Of course, you may just be able to edit the initial entry to match what you did to correct the error.

Perhaps you mean something else besides a true rejection. If so, please provide details.

3

Just do an entry that is opposite to the first entry.
If the EFT was initially paying an Accounts Payable + Supplier, then bank the rejected EFT back to the Accounts Payable + Supplier

4

The funds were initially deducted by the Payer bank and transferred to the Payee bank, the Payee bank subsequently rejected the transfer - account didn’t exist - so the Payer bank puts the funds back a few days later.

5

Understood, if that’s the way things happened.

I guess procedures vary around the world. In my experience, if the details are wrong, the payer bank can’t initiate the EFT, so nothing happens. In fact, banks sometimes initiate very small (a few cents) bidirectional transactions to verify everything before the ordered transaction is initiated. These are immediately reversed. The whole situation causes me to wonder why, in this day and age, procedures haven’t been standardized everywhere.

6

All inter bank transfers need to go via a clearing house - generally overnight. I would be surprise if Bank A could see (test) if an account at Bank B exists.

7

Thanks for the fast responses.
@Tut Brucanna is right here in OZ the bank attempts the transfer with the details and then returns the funds (maybe the day later) and of course charges a fee for the privilege and all three transaction are in the statement.
@Brucanna Thanks that is what I have done just wasn’t sure if there would be GST implications but a plus here = a minus there.
Thanks again

8

Understood, @KateG. @Brucanna’s comments are right on track, then. Here in the USA, procedures are as both of you describe for wire transfers. But there is a separate system for so-called EFTs. And they can, and often do, test the process before conducting the main transfers. I don’t know enough about it to know whether Bank A can actually “see” the account at Bank B. Possibly not. But the protocol is often exercised.

A few examples (there are others):

  1. A loan will be repaid by automated request from and fulfillment to the lender. A trial transfer may occur.

  2. Retirement accounts might be linked to personal bank accounts so distributions from the custodian are available quickly. The retirement custodian can test the protocol before regular distributions begin.

  3. Paychecks will be deposited electronically.

As I said in my earlier post, the system does not appear standardized around the world, which surprised me when I first learned that.