Reversing Journals are special journals that are automatically reversed after a specified date. A reversing entry is a journal entry to “undo” an adjusting entry. When you create a reversing journal entry it nullifies the accounting impact of the original entry. Reversing entries make it easier to record subsequent transactions by eliminating the need for certain compound entries. See an example of reversing journal entry!
A reversing entry is a journal entry to “undo” an adjusting entry. When you create a reversing journal entry it nullifies the accounting impact of the original entry. Reversing entries make it easier to record subsequent transactions by eliminating the need for certain compound entries.
Reversing entry can be created in two ways. The first method is to use the same set of accounts with contra debits and credits, meaning that the accounts and amounts that were debited in the original entry will be credited with the same amount in the reversing journal “nullifying” the accounting impact. The second method is to create a journal with the same accounts but with negative amounts that will also nullify the accounting impact of the original transaction.
The business has taken premises on rent. The rent payable for each month is $200 and the invoice is raised by the landlord on the 15th of the subsequent month. The accounting department takes 5 days to process the payment and deposit the amount in the Landlord’s account. December is the close of the accounting year and the invoice for rent for the month of December will be received by the company on the 15th of January and payment will be made by the 20th of January.
Closing Books: On the 31st of December, the accounting department passes the rent accrual accounting entry, debiting the “Rent Expense” and crediting the “Rent Payable Account”. This entry records the rent for the month of Dec and creates a liability for “Rent Payable” to the landlord next month. At the beginning of the next accounting year, on day one this entry is reversed by debiting the “Rent Payable” and crediting the “Rent Account”.
Making Payment: Once the payment for Rent is made on 20th January (Again by Debiting “Rent Expense” and Crediting “Bank Account”) this reversal will ensure that the rent for last year is not impacting the current year financials as the net impact on the “Rent Expense” account will be zero.
Driving Business Efficiency through Divisions and Departments
In case of a multi-divisional organizational structure, there is one parent company, or head-office. And that parent owns smaller departments, under the same brand name. Dividing the firm, into several self-contained, autonomous units, provides the optimal level of centralization, in a company.
What Is a General Ledger? General Ledger (also known in accounting as the GL or the Nominal Ledger) is at the heart of any accounting system. A general ledger is the master set of accounts that summarize all transactions occurring within an entity. Ledger is the skillful grouping and presentation of the Journal entries. Learn the accounting fundamentals, general ledger process, and general ledger flow.
In some of the ERP tools, there are more than 12 accounting periods in a financial year. This article discusses the concept of accounting calendar and accounting periods. Learn why different companies have different accounting periods. Understand some of the commonly used periods across different organizations and the definition & use of an adjustment period.
Concept of Representative Office
A representative office is the easiest option for a company planning to start its operations in a foreign country. The company need not incorporate a separate legal entity nor trigger corporate income tax, as long as the activities are limited in nature.
GL - Accrued / Unbilled Revenue
Accrued revenues (also called accrued assets) are revenues already earned but not yet paid by the customer or posted to the general ledger. Understand what we mean by the terms accrued revenue, accrued assets, and unbilled revenue. Explore the business conditions that require recognition of accrued revenue in the books of accounts and some industries where this practice is prevalent.
A legal entity is an artificial person having separate legal standing in the eyes of law. A Legal entity represents a legal company for which you prepare fiscal or tax reports. A legal entity is any company or organization that has legal rights and responsibilities, including tax filings.
An allocation is a process of shifting overhead costs to cost objects, using a rational basis of allotment. Understand what is the meaning of allocation in the accounting context and how defining mass allocations simplifies the process of allocating overheads to various accounting segments. Explore types of allocations and see some practical examples of mass allocations in real business situations.
Divisional Organizational Structures
The divisional structure or product structure consists of self-contained divisions. A division is a collection of functions which produce a product. It also utilizes a plan to compete and operate as a separate business or profit center. Divisional structure is based on external or internal parameters like product /customer segment/ geographical location etc.
A Company (also called corporation) may be understood as an association of persons in which money is contributed by them, to carry on some business or undertaking. Persons who contribute the money are called the shareholders or the members of the company. A corporation is an artificial being, invisible, intangible and existing only in contemplation of law. Being the mere creature of law, it possesses only those properties which the charter of its creation confers upon it.
Matrix Organizational Structures
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