1. Gabriela H. Schneider, CMA; Northern Alberta Institute of Technology
INTERMEDIATE ACCOUNTING Seventh Canadian Edition KIESO, WEYGANDT, WARFIELD, IRVINE, SILVESTER, YOUNG, WIECEK
Prepared by:
Gabriela H. Schneider, CMA; Northern Alberta Institute of Technology 2

2. Using Reversing Entries
C H A P T E R 3
Appendix 3A
Using Reversing Entries

3. Learning Objectives
Identify adjusting entries that may be reversed.

4. Reversing Entries Used to reverse two types of adjusting entries:
Accrued Revenues
Accrued Expenses
Reversing entries are recorded and posted on the first day of the new fiscal period
Reversing entries are an option

5. Reversing Entry Guidelines
If reversing entries are used:
All accrued items should be reversed
All prepaid items where cash was debited or credited on the original transaction should be reversed
Amortization and bad debt adjustments are not reversed

6. Reversing Entries – Accrual Example
Given the following original, adjusting and closing entries
Oct. 24 Salaries Expense 4,000
Cash 4,000
Oct. 31 Salaries Expense 1,200
Salaries Payable 1,200
Oct. 31 Income Summary 5,200
Salaries Expense 5,200
On November 8th salaries of $2,500 are paid. $1,200 of
this amount relates to the salary accrual of October 31st

7. Reversing Entries - Accrual Example
If no reversing entry were made on November 1st
Nov. 8 Salaries Payable 1,200
Salaries Expense 1,300
Cash 2,500
Salary Expense for November is $1,300; and
Salaries Payable now has a zero balance

8. Reversing Entries - Accrual Example
If reversing entry is made on November 1st
Nov. 1 Salaries Payable 1,200
Expense 1,200
Nov. 8 Salaries Expense 2,500
Cash 2,500
Salary Expense for November is $1,300; and
Salaries Payable now has a zero balance

9. Reversing Entries – Prepayment Example
Given the following original, adjusting and closing entries
Dec. 10 Office Supplies 20,000
Cash 20,000
Dec. 31 Office Supplies Expense 15,000
Office Supplies 15,000
Dec. 31 Income Summary 15,000
Office Supplies Expense 15,000
No reversing entry necessary here. Office Supplies
(Inventory) was debited in the original transaction.

10. Reversing Entries – Prepayment Example
Given the following original, adjusting and closing entries
Dec. 10 Office Supplies Expense 20,000
Cash 20,000
Dec. 31 Office Supplies 5,000
Office Supplies Expense 5,000
Dec. 31 Income Summary 15,000
Office Supplies Expense 15,000
If reversing entries are used, a reversing entry is made
in order for the expense account balance to equal the
unused supply cost.

11. Reversing Entries - Accrual Example
Reversing entry on January 1st:
Jan. 1 Office Supplies Expense 5,000
Office Supplies ,000
Here, any additional office supply purchases are
debited to the Office Supplies Expense account.
Office Supplies inventory would then be adjusted
During the year-end adjusting process.

12. COPYRIGHT
Copyright © 2002 John Wiley & Sons Canada, Ltd. All rights reserved. Reproduction or translation of this work beyond that permitted by CANCOPY (Canadian Reprography Collective) is unlawful. Request for further information should be addressed to the Permissions Department, John Wiley & Sons Canada, Ltd. The purchaser may make back-up copies for his / her own use only and not for distribution or resale. The author and the publisher assume no responsibility for errors, omissions, or damages, caused by the use of these programs or from the use of the information contained herein.