What are reversing entries and their journal entries?

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This is the final step in the accounting cycle. Reversing entries are made at the start of an accounting period to reverse the adjusting journal entries made at the end of the previous period.

These are made because of last year’s accruals. Also, the prepayments which will be paid during the New Year are no longer needed to be recorded as liabilities and assets.

These entries will make bookkeeping simple or simplify the bookkeeping. If the entry is not reversed, the amounts recorded in previous years are adjusted and account for the new portion. For new adjusted entries, the keeper can’t keep records in the current year because some expenses are recorded earlier.


Consider an example given below with reverse entries −

Journal entry (adjusting)
DateAccount nameDebitCredit
December 31
Wages expenses -accrued
To record payroll accrual for amount owed employees

entry (Reversing)
DateAccount nameDebitCredit
January 1
Accrued expenses-wages
To reverse prior years accrual

entry (reversing)
DateAccount nameDebitCredit
January 5
Wages expenses-cash
To record payroll accrual for amount owed employees

Updated on 09-Jul-2021 07:39:55