5 / 6 Payments, Ledgers & Money Movement

Eighty Eight Stuck Forever

A hotel authorizes $300 at check-in, captures $212 at checkout, then refunds $50. An engineer proposes these ledger postings.

# event debit credit amount
1 authorize accounts_receivable revenue 300.00
2 capture cash_clearing accounts_receivable 212.00
3 refund revenue cash_clearing 50.00

Every row balances. The auditor rejects it anyway. What is the defect?

A

Nothing is wrong with the postings. Every row balances, so the ledger is internally consistent and the auditor is objecting to the account names.

B

Row 1 recognises money on an authorization, which moves no funds and may never be captured, and nothing ever reverses the 88.00 of the hold that was not captured, so accounts_receivable carries a balance that will never clear.

C

Row 3 debits revenue when it should debit refunds_payable, so the refund understates gross revenue for the period.

D

Row 2 has the sides reversed. Capturing funds should debit accounts_receivable and credit cash_clearing.