Reversing entries are
1. normally prepared for prepaid, accrued, and estimated items.
2. necessary to achieve a proper matching of revenue and expense.
3. useful in simplifying the recording of transactions in the next accounting period.
A) 1
B) 2
C) 3
D) 1 and 2

Question

Quizplus · Accepted Answer

Reversing entries are primarily used to simplify the recording of transactions in the next accounting period, especially for accrued expenses and revenues. They are not normally prepared for prepaid items, and while they help in simplifying accounting processes, they are not strictly necessary to achieve proper matching of revenue and expense, which is more directly addressed through adjusting entries.

Reversing Entries Are 1. Normally Prepared for Prepaid, Accrued, and Estimated Items