Types of Reversing Entries (With Simple Examples)
Reversing entries clear prior-period accruals so current-period activity posts cleanly from source systems.
Common reversing entries
Accrued expenses:
- Month-end: Dr Expense / Cr Accrued Liabilities
- First day new month (reverse): Dr Accrued Liabilities / Cr Expense
Accrued revenue:
- Month-end: Dr AR (Unbilled) / Cr Revenue
- Reverse next month to avoid double counting when invoice posts.
Payroll accruals:
- Accrue wages/benefits for days worked but unpaid; reverse when payroll runs.
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What not to reverse
- Depreciation, amortization (systematic).
- Inventory adjustments tied to counts.
- Prepaid amortization schedules.
Tips
- Use auto-reversing journals dated the first of the month.
- Document accrual methodology in your close checklist.
FAQs
Should prepaid expenses be reversed?
No-amortize monthly.
What about sales tax accruals?
Accrue and reverse when filing/payment posts.
Do I need accruals on cash basis?
If you present accrual reports-yes.
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Related reading
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