PSA L&P - EOY or EOM: How to create a reversing Journal Entry

How to create a reversing Journal Entry

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.

Ledger and Payables → Journal Entries 

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. Note, even if the entry exists and is in a closed period, marking the box for a reversing entry and clicking submit will create a reversing entry.

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 comment field will automatically fill in the "Reversing Journal Entry "XX". The reversing entry will be dated for the first day of the month following the current month of the system date. For example. The program is in the Month of May, but the system date is in June. The reversing journal entry will be dated for 7/1/20xx. 

The Ledger would then reflect the following entries against the Expense Account

Date Debit Credit  
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

In the example above, the desired month to record the expense was November but the invoice wasn't entered (Accrual) or paid (Cash) until December. As a result, a Correcting and Reversing journal is created.

  • The Correcting Journal will book the expense in November.
  • Then, the December reversing Journal will offset the December invoice (Accrual) or Check (cash).
  • As a result, the expense is booked in November as originally desired. 

 

 

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