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Chapter 3: Q.3-18Q (page 128)

Question: What are reversing entries, and why are they used?

Short Answer

Expert verified

Answer

Reversing entry is termed as an alternative journal entry made at the beginning of a financial period. The purpose of these entries is to ease day-to-day accounting methods, and they relate only to specific adjusting entries, that is, to accrued expenses and revenues.

Step by step solution

01

Reversing entry

Reversing entries are prepared by firms before recording journal entries for the transactions of a new period. A reversing entry is the opposite of an adjusting entry. A firm normally prepares to reverse entries soon after listing closing entries or at the commencing of the next period. It reverses the effect of adjusting entries.

02

Purpose of reversing entry

Reversing entries make the listing of resulting transactions related to adjusting entry simple. A reversing entry assists the firm in recording day-to-day resulting transactions without regarding the probable impact of the previous adjusting entry.

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Most popular questions from this chapter

List two types of transactions that would receive differentaccountingtreatments using (a) strict cash basis accounting, and (b) a modified cash basis.

鈥淎 worksheet is a permanent accounting record, and its use is required in the accounting cycle. 鈥淒o you agree? Explain.

E3-13 (Lo5,6) (Closing Entries) The adjusted trial balance of Lopez Company shows the following data pertaining to sales at the end of its fiscal year, October 31, 2017: Sales Revenue \(800,000, Delivery Expenses \)12,000, Sales Returns and Allowances \(24,000 and Sales Discounts \)15,000.

Instructions:

(a) Prepare the revenues section of the income statement.

The purpose of presenting comparative information in the

transition to IFRS is:

(a) to ensure that the information is a faithful representation.

(b) to be in accordance with the Sarbanes-Oxley Act.

(c) to provide users of the financial statements with information on GAAP in one period and IFRS in theother period.

(d) to provide users of the financial statements withinformation on IFRS for at least two periods.

What differences are there between the trial balance before closing and the trial balance after closing with respect to the following accounts?

a) Accounts payable

b) Expense accounts

c) Revenue accounts

d) Retained Earnings account

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