Once a payment has been posted, you sometimes need to "cancel" it. This can be done by simply right+clicking the outgoing or incoming payment document and choosing "Cancel". That process creates a new entry to reverse the payment posting.
Can the original payment and the reversal entry be auto-reconciled?
The answer is no, when you manually cancel a payment, it is not auto reconciled.The reason is that the cancellation is not always something that should auto reconcile.
Sometimes you make a mistake and need to just cancel the payment, this might make sense for an auto-reconcile. But other times, you might be canceling a payment because it was a cancelled check or for some other legitimate reason.
In these scenarios, you would want to have both transactions in the Bank Rec and reconcile each one individually.