Reversing Entry
Definition
A journal entry made at the start of a period to cancel a specific adjusting entry from the prior period, simplifying the recording of the actual transaction when it occurs. It prevents double counting of accruals.
Related Terms in Core Accounting
Compound Journal Entry
A journal entry that affects more than two accounts at once, with multiple debits and/or credits, while still keeping total debits equal to total credits. Payroll and invoices with tax are common examples.
Ledger vs Journal
The journal is the chronological record where transactions are first entered; the ledger organises those entries by account. The journal answers "what happened and when," the ledger answers "what is the balance of this account."
Accrued Income
Revenue that has been earned but not yet invoiced or received, recorded as an asset so it appears in the period it was earned. It is the mirror image of accrued expenses.
Provision
A liability of uncertain timing or amount recognised when a business has a present obligation that will probably require settlement, such as warranty costs or expected bad debts. It is estimated and reviewed each period.
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