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Reversing Entry and Adjusting Entry

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Please distinguish between a reversing entry and an adjusting entry., Are reversing entries required?

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Solution Summary

This solution of 613 words defines the actions of reversing an entry and adjusting an entry and also compares them in a worked out example enclosed in an Excel file.

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Distinction between Adjusting entries and reverse entries is fully explained in the word document as follows.

A trial balance is a list of accounts and their balances at a given time.The basic purpose of a trial balance is to prove the arithmetical accuracy of book keeping process.
2 It establishes the equality of debits and credits after posting.
But agreement of trial balance is not a conclusive proof of correctness of accounts. It does not guarantee that all transactions are recorded or posted correctly.
3 It is possible that some transactions are omitted to be recorded or posted to the related accounts. It also possible that journal entries are posted twice or incorrect accounts are used in journalizing or posting process.

4 There are some timing issues also in the preparation of financial statements. The economic life of the business is divided in to artificial periods in ...

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