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Reversing Entries

Reversing entries are entries that are posted in the beginning of a new period only to be reversed in the subsequent period; this is usually the case for accrual accounting entries. As an example, consider the financial analyst calculates Commissions accrued of a company and books the following reversing entry:

December 31st, 2009
Dr. Commisions Receivable $5,000  
  Cr. Commisions Revenue $5,000
To book accruing entry for revenue earned but not yet collected.

January 28th, 2010
Dr. Commisions Revenue $5,000  
  Cr. Commissions Receivable $5,000
To reverse commission revenue entry booked last month.

January 28th, 2010
Dr. Cash $5,000  
  Cr. Commissions Revenue $5,000
To book actual receipt of cash for commissions revenue earned.

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