A reclassification account is an account used if needed to balance transaction distributions such as projects or transaction codes. It is used to ensure balancing by class, project, and transaction code when posting credit memos. The reclassification account must be a transfer account. If a transfer account is not available, you will be prompted to create one before continuing with the GL pre-conversion utility.
If the accounts use the same fund but are out of balance by another requirement, such as project or class, then the program uses the reclassification account to balance the distribution.
In the Reclassification account field, you are required to enter a transfer account to use for reclassification. To help you enter an account, click the arrow button to look up account segments and click the binoculars button to look up an account.
Note: You only need the reclassification account if the Credit Memo and Invoice take place in the same fund (sometimes called an intrafund account, only necessary if a transaction characteristic is out of balance). If they are in different funds, the interfund accounts will be used instead of the reclassification account.
Example: Using a Reclassification Account to Distribute a Credit Application
You have already paid an invoice for van expenses for the football team when you realize you were overcharged. The company, Auto Express, issues a credit. The invoice debited the Bus Expenses account in fund 3, which requires balancing by class and project. Like the original invoice, the credit memo carries the project Football in the distribution, and it credits the Bus Expenses account.
Because you already paid the first invoice, you wait to apply the credit memo to the next incoming invoice from Auto Express, which is for van rental for the cheerleading team. This invoice also debits the Bus Expenses account in fund 3. The project Cheerleading is added to the invoice distribution. When you apply the credit, the application distribution balances by fund but not by project. Because balancing by project is required for fund 3, the program automatically uses the Reclassification account to balance the application distribution. In this case, the reclassification account being used is 03-70000-00. On the Application History screen, you can click the Dr/Cr Entries button to view the General Ledger debits and credits.
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