QUESTION:
Reversing Entries
Hi entry reversers!
You needed some reversing entries this time! Why do you need reversing entries? What are some common reversing entries? Do the reversing entries belong in a previous period, a current period, or a future period and why?
This discussion thread will address closing entries. The questions are:
1) Why do you need reversing entries?
2) What are some common reversing entries?
3) Do the reversing entries belong in the previous period, a current period or a future period? Why?
KATHERINE'S ANSWER:
What I am understanding is that we need reversing entries in order to off set any unearned or unpaid amounts from the previous month. For example we know that we have an expense that we going to be billed for in march, but it happened in February so we would create a reversing entry at the beginning of March so that when we get the invoice it will offset the amount.
JONATHAN'S ANSWER:
Melinda, we need reversing entries so that we know the transaction had occured during the month that it has occured as opposed to the month it was received. It will dilute the financial statements and trial balance if we fail to do so. The entry being offset until the next month is when we create the transaction, but I do not understand if the utilities or rent that is due for the prior month will be produced on the month received as well as the occurring month.