This post addresses reversing accounting entries.
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Reversing entries are useful when the company will book the entire expense when the invoice comes in. Some companies chose not to use reversing entries, but to post the difference between the accrual and actual invoice. For example, if the company accrued $100 for the electric bill but the invoice came in at $85, the company would book the reduction to the liability (debit) for $15 as well as the credit to the expense $15. This would cause the expense to have a contra balance until other expenses or the end of month accrual was recorded.
Which method do you think would be cleaner from a paper trail perspective? Why?
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This solution discusses if reversing entries would be cleaner from a paper trail perspective.
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Reversing the entry would have a much cleaner paper trail, because it is more easily traceable to the actual document. It can also be verified against the actual amount stated on the document. If ...
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