Step 2
Reversal of Prior Year Accruals
The following accounts should be reviewed from your prior year working paper file and reversed
in the current year as required:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
1300 – Trade accounts receivable
1350 – Other accounts receivable
1400 – Accrued interest receivable
1600 – Inventory
1700 – Prepaid expenses
1750 – Long-term prepaid
1799 & 1999 Current portion of long-term receivables
4050 – 4059 Accounts payable (there may be individual accounts used for
individual accounts payable, these accounts have to be reviewed on an individual
basis to find out if they need to be reversed)
4090 – Wages payable
4125 – Revenue received in advance
4130 – Management fees payable
4200 – 4201 – Current portion of long-term debt
4202 – 4203 – Current portion of capitalized lease
To reverse the adjusting journal entry, look at last year’s entry and reverse accordingly.
The cross-reference will be PRIOR A??
Quirks to watch for
If dividends were recorded in the prior year (account 5909) an adjusting entry is required
to close the dividends to retained earnings (account 5901)
When reversing prepaid expenses watch any item in the adjustment column in the prior
year working paper file should not be reversed in the current year.
When reversing wages payable the portion that goes to the shareholder loan or the
drawings account is the amount payable for the employee portion of CPP.
Accrued interest payable can have both a bank charge portion as well as a long-term debt
portion.
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The following accounts are only in the chart of accounts to ensure the financial statements work
correctly. Please ensure that these accounts are never used in any portion of your working paper
file, and that no adjustments are posted to these accounts.
1500 – SS tax receivable – should not be used
1510 – Corporate income tax receivable should not be used
1515 – Corporate capital tax receivable should not be used
1520 – BC logging tax receivable should not be used
1530 – GST receivable should not be used
1575 – 1577 Shareholder loan receivable should not be used
4010 – Bank indebtedness
Follow last year’s working papers and ensure you present your
working papers in the same manner.
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