CH3Reversing Entries -...

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Reversing Entries – an alternate way to handle some Adjusting Entries Who decides to use reversing entries?   The accountant responsible for the books of the  company Does it change what is reported on financial statements?  NO Why are they used?  To make day to day transaction recording easier. Some common reversing entries: Example #1 Employees are paid every Friday for the five-day work week ending on that day. Salaries amount to $2,400 per week. The accounting period ends on a Wednesday, the last day of the month. In a prior example, we did this journal entry for the adjustment: Salaries Expense 1440 Salaries Payable (2,400 / 5 = $480); ($480 x 3 = $1,440) 1440 Reversing entry approach: Wednesday, period end journal entry, but coded in the accounting system with a big  “R”  for reversing  entry: Salaries Expense 1440 Salaries Payable (2,400 / 5 = $480); ($480 x 3 = $1,440) 1440 On Thursday, the morning after period end, the accounting system automatically reverses this entry.  Remember this is in another accounting period entirely . Salaries Payable 1440 Salaries Expense 1440 Right now, for the new month, the salaries expense for the month is showing  a net CREDIT  transaction!  Or, in other words a negative expense.  But that is okay, because, on Friday, when the  payroll is paid, this entry will happen:
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This note was uploaded on 12/03/2009 for the course ACG 3131 taught by Professor Rotella during the Spring '08 term at University of Central Florida.

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CH3Reversing Entries -...

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