Creating a reversing Journal Entry for Year End or Month End Reporting
When making a month-end or year-end adjustment, you can create a reversing journal entry by marking the box on the entry screen, Insert reversing Journal Entry. For example, you may not have received an invoice but need the amount of the expense to show in your Statement of Activities. By creating a reversing journal entry, you can record the amount of the invoice in one month and automatically reverse it the next. When the invoice is actually received, you can simply enter it.
To create a reversing journal entry, create a journal entry as you normally would, but additionally, check the box to insert a reversing entry. When you submit the original entry, another new reversing journal entry will display on your screen.
Reversing entries are typically dated the first day of an accounting period in order to remove certain adjusting entries made in the previous accounting period. Reversing entries are used in order to avoid the double counting of revenues or expenses and to allow for the efficient processing of documents.
The Ledger would then reflect the following entries against the Expense Account
|11/30/2017||100.00||Expense Incurred, no invoice; Journal entry created|
|12/01/2017||100.00||Reversing Journal Entry|
|12/25/2017||100.00||Invoice entered or bill paid|
The entries against the expense wash each other out in the month in which the invoice was received. The expense is recorded and reported when it is incurred.