REVERSING ENTRIES
WHAT -
Exact reverse of an adjusting entry
WHEN -
1st day of next fiscal period
WHICH ADJUSTING ENTRIES SHOULD BE REVERSED?
( only those adjustments that create an A/R or short term liability. Those reversing
entries will be followed by cash receipts or cash payments in the near future.
USE REVERSING ENTRIES FOR:
( entries that record
- unrecorded expenses (eg. Interest, Salaries)
- unrecorded revenue (eg. Interest Earned)
( NOT apportionments
- recorded costs (eg. Insurance, Supplies)
- recorded revenue (eg. Rent collected in advance)
EXAMPLE
Dec 31
Jan 1
Jan 2
Salaries Expense
Salaries Payable
Adjusting Entry
1800-
Salaries Payable
Salaries Expense
Reversing Entry
1800-
1800-
1800-
Salaries Expense
3000Bank
3000Paid salaries for week ended Jan 2, 19-2
(2 workdays of expense have been recorded in 19-2)