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what kind of company shows reversing entries?
Accrual accounting requires companies to record transactions as they occur. For example, purchasing an insurance policy for the next 12 months requires companies to record an asset called prepaid insurance. [ Other accrual entries require companies to recognize expenses prior to their occurrence. Utility bills often come at odd times during an accounting period. To accurately reflect utility expense prior to payment, companies will record an accrued expense into the general ledger. Reversing Entries Accrual entries are simply representative of future transactions. When the real
information comes in, accountants will need to reverse their accrual entries. Reversing entries will be the exact opposite of the accrual entry. For example, a utility accrual entry will debit utilities expense and credit monthly accruals. The reversing entry will credit utilities expense and debit monthly accruals to remove the entry from the general ledger. Accounting Cycle Reversing entries are typically part of the closing process of the accounting cycle. Accountants will review a trial balance to ensure all financial accounts are accurate. Any missing information may require accrual and reversing entries. Accountants will typically date accrual entries as the last day of the month and reversing entries as the first date of the next accounting period. Read more: Accounting: Reversing Entries | eHow.com ]
Expert answered|selymi|Points 7552|
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Asked 3/2/2012 9:15:03 AM
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