Essay About Reversing Entries And Opportunity Reverse

Xacc 290 – Reversing Entries
Reversing EntriesXACC/29002/07/2016         Reversing EntriesReversing entries is a method used by many accountants to simply bookkeeping when starting off in the new year to prevent errors and double entry.  Reversing entries can be used for accrued income, accrued assets, unearned revenues, and prepaid expenses.Opposite of the journal entries, reversing entries are typically made at the beginning of an accounting period to reverse or cancel out information from the journal entries that was made at the end of the previous accounting period which is the last step within the accounting cycle.  Under normal circumstances, reversing entries are made due to the accrued income or expense from previous accruals which will be paid off or used up and no longer needed to be recorded as assets or liabilities.  The reversing process save the accountant time and avoid potential errors that could lead to double entries that may ultimately misrepresent information within the financial statement.  By analyzing the data from the journal entries, it ensures that all expenses, assets, revenues, etc. are properly allocated in the end for accurately reporting.  Reversing entries are widely utilized by many small cash basis companies for simplicity, efficiency by correcting mistakes that may have been caused during the journal entry stage providing a more accurate reporting when preparing the income statement.  Since accountants do not have to do reversing entries and it is not required by GAAP standards, reversing entries are optional.In conclusion, the accounting is a very complex process that requires accountants to pay close attention to details in accuracy, precision, and the ability to follow standard procedures.   Even with the most experience accounts, many mistakes may occur during the journal entry process.  When mistakes occur and were not captured during the period, it provides the accountants the opportunity reverse or cancels out the entries to eliminate the errors.   This is a nice advantage when operating a small cash basis company.  By conducting all accounts reconciliations for all balance sheet accounts at a regular interval will enable the accountants to detect any or all transactions that needs to be reversed.