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484 views13 pages

Powerpoint - Reversing Entries

545645645465465

Uploaded by

UPHSD JPIA
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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Accounting Practices

501
Chapter 8
Reversing entries

Cathy Saenger, Senior Lecturer,


Eastern Institute of Technology Pearson 2011

Reversing Entries
Prepaid
Expenses

Accrued
Income

Accrued
Income in
Expenses
Advance
What do you think happens with the Current Asset
and Current Liability accounts created during
balance day adjustments?
They have to be reversed to the original
income and expense accounts in the new
period
Ch8H - Reversing entries

Reversing Entries
Prepaid expenses (Rent)
Accrued expenses (Wages)
Accrued income (Interest)
Income in advance
(Commission)

O/balances
Dr
Cr
500
300
100
600

Lets say we have the above opening balances at


the start of a new accounting period (1 April)
These are temporary asset and liability accounts
created with balance day adjustments
Ch8H - Reversing entries

Reversing Entries
O/balances

Prepaid expenses (Rent)


Accrued expenses (Wages)
Accrued income (Interest)
Income in advance
(Commission)

Dr
500

Cr

Reversi
ng
Dr Cr

After

300
100
600

At the start of a new financial period, the above


accounts have to be reversed back to the original
income and expense accounts.

Ch8H - Reversing entries

O/balances

Prepaid expenses (Rent)


Accrued expenses (Wages)
Accrued income (Interest)
Income in advance
Rent
(Commission)

Dr
500

Cr

Reversi
After
ng
Dr 500
Cr NIL

300
100
600

500

The Prepaid expenses (Rent) account is reversed to


the Rent expense account in the new accounting
period (starting on 1 April)
Ch8H - Reversing entries

O/balances

Prepaid expenses (Rent)


Accrued expenses (Wages)
Accrued income (Interest)
Income in advance
Rent
(Commission)

Dr
500

Cr

Reversi
After
ng
Dr 500
Cr NIL

300
100
600

General
Journal
Account
Date
Ref
no
1/4 RentTitles
Prepaid expenses (Rent)
Being entry required to reverse
prepaid rent

Ch8H - Reversing entries

500

Debi
t500

Credit
500

O/balances

Prepaid expenses (Rent)


Accrued expenses (Wages)
Accrued income (Interest)
Income in advance
Rent
(Commission)
Wages

Dr
500

Cr
300

Reversi
After
ng
Dr 500
Cr NIL
300

NIL

100
600

500
300

The Accrued expenses (Wages) account is reversed to


the Wages account in the new accounting period
(starting on 1 April)
Ch8H - Reversing entries

O/balances

Prepaid expenses (Rent)


Accrued expenses (Wages)
Accrued income (Interest)
Income in advance
Rent
(Commission)
Wages

Dr
500

Reversi
After
ng
Dr 500
Cr NIL

Cr
300

300

NIL

100
600

General
Journal
Account
Date
Ref
Titles
expenses (Wages) no
1/4 Accrued
Wages
Being entry required to reverse
wages accrued

Ch8H - Reversing entries

500
300

Debi
t300

Credit
300

O/balances

Prepaid expenses (Rent)


Accrued expenses (Wages)
Accrued income (Interest)
Income in advance
Rent
(Commission)
Wages

Dr
500

Cr
300

Reversi
After
ng
Dr 500
Cr NIL
300
100 NIL

100
600

Interest
income

NIL

500
300
100

The Accrued income (Interest) account is reversed to


the Interest income account in the new accounting
period (starting on 1 April)
Ch8H - Reversing entries

O/balances

Prepaid expenses (Rent)


Accrued expenses (Wages)
Accrued income (Interest)
Income in advance
Rent
(Commission)
Wages

Dr
500

Reversi
After
ng
Dr 500
Cr NIL

Cr
300

300
100 NIL

100
600

Interest
income

NIL

500
300
100

General
Journal
Account
Ref
Date
Titles
no
income
1/4 Interest
Accrued income (Interest)
Being entry required to reverse
interest accrued
Ch8H - Reversing entries

Debi
t100

Credit
100

10

O/balances

Prepaid expenses (Rent)


Accrued expenses (Wages)
Accrued income (Interest)
Income in advance
Rent
(Commission)
Wages

Dr
500

Cr
300

100
600

Interest
income
Commission
income

Reversi
After
ng
Dr 500
Cr NIL
300

NIL
100 NIL

600
500

NIL
300

100
600

The Income in advance (Commission) account is


reversed to the Commission income account in the
new accounting period (starting on 1 April)
Ch8H - Reversing entries

11

O/balances

Prepaid expenses (Rent)


Accrued expenses (Wages)
Accrued income (Interest)
Income in advance
Rent
(Commission)
Wages

Dr
500

Reversi
After
ng
Dr 500
Cr NIL

Cr
300

100
600

Interest
income
Commission
income

300

NIL
100 NIL

600
500

NIL
300

100
600

General
Journal
Account
Ref
Date
Titles
in advance (Comm) no
1/4 Income
Commission income
Being entry required to reverse
commission received in advance
Ch8H - Reversing entries

Debi
t600

Credit
600

12

Mmmm clear as mud!

Ch8H - Reversing entries

13

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