Summary of Reversing Entries

I have not failed. I’ve just found 10,000 ways that won’t work. – Thomas Edison

Small Business Accounting Tip

Recording accounting journals is a process for each company.  This process entails receiving  income from clients and customers, recording business expenses and maintaining a business budget just to name a few.  Accounting journal entries are necessary but some of those entries are expected to be reversed the next month because the actual invoice (cost) is set to be processed for payment. 

​Here is a summary of guidelines for reversing entries to companies of all sizes.

• ​All accrued items should be reversed
• All prepaid items for which the original cash transaction was debited or credited to an expense or revenue account should be reversed
• Adjusting entries for depreciation and bad debts are not reversed

​A key process which should be established within any accounting group is for each responsible Accountant to review all accrual general ledger accounts quarterly for any historical accruals that have not been reversed and should have been within the past quarterly month.  This process would avoid audit exceptions and income statement losses.

​Visit our website today to learn more about accounting services Fontenot & Associates Solutions can support your team with on-site or virtually.