The reversal control point flags transactions which are reversals of a previous transaction in the ledger.
The reversed control point flags transactions which are reversed by a subsequent transaction in the ledger.
The algorithm kind of finds both at once and then pairs them together. The earlier one is “reversed” and the later one is “reversal”.
Here’s an example
Basically a normal buyer/seller relationship is
- I sell you something
- You give me money
- I give you what you paid for
- You’re happy
What Manager 1 was doing, is that he was pretending to be the Buyer
- He would sell himself goods
- Take the money
- Shortly after, he’d ‘return’ the item into Inventory, but never actually took the money back. This is known as “Reversed“.
- He went back into the books and adjusted the original transaction. This is known as “Reversal“.
Reversal happens when they go back and adjust the original ‘purchase’ (i.e., previous). Reversed is “oh darn, they returned their goods. we gave them back their 100$” (how a typical return happens. The Manager in this case just wasn’t returning the $)
This is a common type of fraud where someone would say, “look how much money we’re making! We sold so much!” then they would reverse the transaction and say, “oh darn, they returned all their stuff… 🙁 but thanks for all the money you paid us for our stock!!”