REVERSING JOURNAL ENTRY

Created by Erika Go, Modified on Fri, 7 Mar at 10:39 AM by Erika Go

A2000 ONLINE SUPPORT DEPARTMENT

KNOWLEDGE BASE

A reversing journal entry is used in accounting to cancel out or "reverse" a specific adjusting entry made at the end of the previous accounting period, typically done at the beginning of the new period, to prevent double-counting of revenues or expenses and ensure accurate financial reporting; it essentially removes the accrual from the balance sheet so the actual transaction can be recorded correctly when it occurs.

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1. WHEN THIS BEEN USED?

Primarily used for adjusting entries related to accrued expenses or revenues, like salaries payable or interest earned, where the expense or revenue is recognized in one period but the cash payment is made in the next period.

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2. HOW IT WORKS?

The reversing entry is the exact opposite of the original adjusting entry, meaning the accounts that were debited in the accrual are credited in the reversal, and vice versa.

2.1 Go to Finance > GL Operations > Journal Voucher (GJ)

2.2 Select a GJ transaction you wanted to create a reversal entry.

2.3 Just click the “create auto-reverse journal’’ and select a date when you wanted to post the reversal entry.

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3. BENEFITS OF THIS REVERSAL JOURNAL ENTRY

3.1 Prevents double counting: By reversing the accrual at the beginning of the new period, the actual transaction can be recorded without including the previously estimated amount.

3.2 Simplifies bookkeeping: Allows accountants to record transactions normally without having to factor in previous accruals.

3.3. Improves accuracy: Helps identify when revenues or expenses have not been received or incurred as expected

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