A reversing entry is the exact opposite of an adjusting entry made in a previous period. It is made at the beginning of a new period to cancel the effect of the adjusting entry from the previous period. It simplifies the accounting process and ensures that the accounts reflect the correct balances.

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A Reversing Entry

Question 179

Multiple Choice

A reversing entry

A) reverses entries that were made in error.
B) is the exact opposite of an adjusting entry made in a previous period.
C) is made when a business disposes of an asset it previously purchased.
D) is made when a company sustains a loss in one period and reverses the effect with a profit in the next period.

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