What are Reversing Entries

Reversing entries or reversing journal entries, tend to be journal entries produced at the start of an accounting period to reverse or cancel out adjusting journal entries made at the finish of the previous accounting time period. This is the last step in the accounting cycle.

Reversing entries usually are made to simplify accounting in the new year. For instance, if an accrued expense has been recorded in the previous year, the accountant or bookkeeper can reverse this entry and account for that expense in the new year when it is paid. The reversing entry erases the prior year's accrual and the bookkeeper does not have to worry about it.

Why are Reversing Entries Optional

Reversing entries assist in preventing bookkeepers and accountants through double recording expenses or revenues. Reversing entries are frequently used with accrual-type adjusting entries.

Reversing entries are optional because they are recorded in reply to accrued liabilities and accrued assets that were produced by adjusting entries at the finish of a reporting period. The goal of reversing entries is to simplify a firm's record keeping.