Reversing Entries

Reversing entries are when an accountant makes adjustments to the beginning of the next accounting period. This would be the opposite of what had been done to an entry in the previous period. (Kimmel, 2011) For example, a utility bill. The utility bill would be recorded in one month as received. When the next period happens is when it will be paid so the amount will need entered again. This time is will just need reversed.

Reversing entries may be a helpful method, there are however, pros and cons to using this method. The downfall to using reverse entries is, there could be a greater chance a mistake could be made or forgetting to put in or take out one of the entries could happen because there would be more entries. This will eventually double the work load for the accountant. (Reeves, 2011)

The positive to using this method to remove an entry in the previous period is there is nothing special which needs to be done. The same exact numbers are just needed to be inserted in the right place. This process can be done by anyone. Even if they are not an expert in accounting and journalizing. This method just cancels out an entry which was made during the last period. (Reeves, 2011)

The reason reversing entries are optional is because it can only be used on adjustments which creates accounts receivable. An example would be accruals. Since not all companies are cash based, it is not a mandatory accounting method.