Reversing Entries
Optional journal entries at the start of a new period that reverse prior-period accruals to simplify bookkeeping.
What is Reversing Entries?
Reversing entries are optional journal entries made at the beginning of a new accounting period that reverse specific adjusting entries from the prior period. They simplify bookkeeping for recurring accruals by preventing double-counting when the actual transaction is recorded. Reversing entries are most commonly applied to accrued revenues and accrued expenses.
Example
Example
A company records a $5,000 accrued wages expense on December 31. On January 1, a reversing entry zeros it out. When the January payroll is actually processed, only one entry is needed — no manual netting against the prior accrual.