Why use reversing entries in accounting

Did you learn? When and why might reversing entries be used? Are reversing entries mandatory? Demonstrate, by example, the use of reversing entries, versus no reversing entries.

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For example, you made an entry to recognize a phone expense last month as part of the closing of the month process. Now the bill has been entered in the accounting system, and an expense was again recognized. The reversing entry will zero out the expense, correcting the situation. Reversing entries related to period closing always are paired with entries from the past.

You can enter a journal entry in January and reverse it in February to avoid duplication in February. You don't normally go back to January to reverse an entry done in February. Reversing entries is a simple process that can be performed by any employee without much knowledge of accounting.

Basically, the account originally debited is now credited and vice versa. There's no need to research or conduct any calculations -- all you need to do is reverse the original entry using the same exact numbers with no changes.

You can give a clerk a list of entries to reverse, and it'll be understood and done easily. There's no mystery to it. Previous The Accounting Cycle. Next Correcting Entries. Removing book from your Reading List will also remove any bookmarked pages associated with this title. Are you sure you want to remove bookConfirmation and any corresponding bookmarks?

My Preferences My Reading List. Accounting Principles I. Reversing Entries.