How does reversing entries work?

Reversing entries act as counteractions to specific prior-period adjustments in the bookkeeping process. Initiated at the beginning of a new accounting period, these entries neutralize items like accrued expenses or revenues, ensuring no double recording. For example, an unpaid recognized expense from a previous period is offset with a reversing entry in the subsequent period. By employing such entries, bookkeepers ensure a coherent and streamlined general ledger, optimizing accuracy and upholding the integrity of accrual-based accounting.

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