Reversal vs reversing entry
Each, defined
Reversing entry
An entry dated the first day of the next period that exactly offsets a period-end accrual, so the real invoice can be coded normally without double-counting.
Side by side
| Reversal | Reversing entry | |
|---|---|---|
| Purpose | Undo a wrong posted entry | Undo a month-end accrual |
| Planned | Unplanned | Planned, often automatic |
| Dated | In the first open period | First day of the next period |
How they relate
Posted entries are never edited or deleted. When one is wrong, a reversal posts the same lines on opposite sides, dated in an open period, and the correction follows. The audit trail keeps all three.
A reversing entry is not a correction. It is part of the accrual routine: the month-end estimate is undone on day one so the vendor's invoice can be entered without double-counting.
Questions
- Why reverse instead of editing?
- Because posted entries are evidence. Editing one destroys the record of what the books said when they were reported.
- Are all adjusting entries reversed?
- Usually not. Depreciation and prepaid releases follow a schedule and are not reversed.
See it computed
Worked through: the calculators, the journal entries and the tools that use these terms.
- Journal entry for accrued expensesAt month-end, debit the expense and credit Accrued expenses for work received but not yet billed. Reverse the accrual on the first day of the next month, then book the vendor's bill as usual when it arrives.Entry
- Journal entry for accrued wagesAt month-end, debit Wages and salaries and credit Accrued wages for the days worked since the last payday. On payday, reverse the accrual or debit Accrued wages for the part of the payroll it covers.Entry
Definitions are the glossary’s, generated from the same documents. Figures in the examples are computed by tested functions, not typed. General information for US companies under US GAAP, not accounting or tax advice.