reversing

entries
by Angelo Ellica Jadraque, CPA, MM
 Prior to reversing entries

 Opening Entry is done

for the succeeding
accounting period.
 Items for Opening Entry
are the items found in
the Post-closing TB.
 Prior to reversing entries

 The purpose of opening

entry is to journalise the
real accounts if the
business will use new
sets of books for the
new accounting period.
Opening entry jan. 1, 2020

2020
 Reversing ENTRIES
 Reversing entry is done in
a succeeding accounting
period.

 The purpose is to facilitate

correct recording of
transactions related to
adjusting entries.
 WHAT ITEMS THAT NEED
REVERSING ENTRIES?
1. All accruals

2. Expense Method on recording

pre-payments
3. Income Method on recording
pre-collections
Accrual
e.g. accrued expense
December 31, 2019; the water bill for
the month is not yet received. The
average monthly water consumption is
P1,500.

Adjusting Entry on Dec. 31, 2019:

Light & Water Expense P1,500
Accrued Light and Water P1,500
To adjust water consumption that is
not yet paid.
 T-ACCOUNTS after Post-closing
Trial Balance
Accrued Light & Water
Light & Water Expense
Adj.Ent. P1,500
e.g. accrued expense
December 31, 2019; the water bill for
the month is not yet received. The
average monthly water consumption is
P1,500.
Reversing Entry on Jan. 1, 2020:
Accrued Light and Water P1,500
Light & Water Expense P1,500

To reverse adjusting entry on accrued

light & water.
 T-ACCOUNTS
Accrued Light & Water
Light & Water Expense
R.E. P1,500 Adj. Ent. P1,500
R.E. P1,500
e.g. accrued expense
Jan. 10, 2020; the water bill was
received and paid. The same amount
P1,500.

Journal Entry on Jan. 10, 2020:

Light & Water Expense P1,500
Cash P1,500
To record payment of water consumption.
 T-ACCOUNTS
Accrued Light & Water
Light & Water Expense
R.E. P1,500 Adj. Ent. P1,500
1/10 P1,500 R.E. P1,500
2/11 P1,500

Payment for
January 2020
consumption
 INCOME METHOD
JOURNAL ENTRY

Nov. 1- Cash ………………… P90,000

Rent Income………. P90,000
To record to cash received
for 3 months rental.
 INCOME METHOD
Adjusting ENTRY on december 31, 2019

December 31, 2019 is the end of accounting period

Adj. Entry Rent Income……. P30,000

Unearned Rent Income… P30,000
To take up the unexpired
portion of advance
collection.
 T-ACCOUNTS AFTER POST-CLOSING
TRIAL BALANCE
Unearned Rent Income RENT Income
Adj. Entry P30,000
 T-ACCOUNTS AFTER POST-CLOSING
TRIAL BALANCE
Unearned Rent Income RENT Income
Rev. Entry
Rev. Entry P30,000 Adj. Entry P30,000 P30,000

2/1 90,000

Pre-collection
February