Reversing Transactions
Use the Reverse Transactions activity to reverse activity on existing journal entries. Reversing journal entries are made on the first day of a new GL period to reverse the effects of adjusting entries made on the last day of the previous GL period, without changing the period or amount.
Reversing entries are used for two purposes:
• Correcting errors. Correct a posted transaction by posting an opposing entry to net out the original amounts.
• Posting accruals, such as payroll earned, but not yet paid. Post an entry (typically, on the last day of a GL period) and immediately reverse the entry on the first day of the next GL period. This procedure lets you record subsequent payments without having to recognize the portions that were accrued at an earlier date.
Note: It is recommended that you set up a standard Journal Entries daybook for accruals. Use the daybook code as a search filter, select all accruals, and reverse them simultaneously.
A reversing entry consists of two parts: the original adjusting entry, and the reversing, or opposite entry. The second entry reverses the position of all debits and credits.
You can reverse a journal entry in two ways: manually or automatically.