Appendix 4A: Completing the Accounting Cycle Chapter 4

Learning Objectives Understand reversing entries (see Appendix 4A, located at myaccountinglab.com)

Reversing Entries: An Optional Step Special journal entries Ease the burden of accounting for transactions in a later period Are the exact opposites of certain end-of -period adjustments Used with accrual-type adjustments Not required by GAAP

Accounting for Accrued Expenses Typical journal entry at the end of a period After posting, the accounts are updated Typical journal entry at the end of a period

Making a Reversing Entry Normal adjusting entry to accrue Salary payable The reversing entry just reverses the debit and the credit and is dated the first day of the new period

Making a Reversing Entry Notice that Salary expense account contains the $900 adjustment, but it is a credit in the account The credit balance is eliminated on June 1, when it pays the payroll and debits Salary expense This cash payment entry is posted as follows:

P4A-1A: Journalizing reversing entries Refer to the data in Problem 4-32B. Open accounts for Salary payable and Salary expense. Insert their unadjusted balances at January 31, 2012. Journalize adjusting entry (e) and the closing entry for Salary expense at January 31. Post to the accounts. On February 5, Leopard Anvils, Inc. paid the next payroll amount of $600. This payment included the accrued amount at January 31, plus $100 for the first few days of February. Journalize this cash payment, and post to the accounts. Show the balance in each account. Using a reversing entry, repeat Requirements 1–3. Compare the balances of Salary payable and Salary expense after using a reversing entry with those balances computed without the reversing entry (as they appear in your answer to Requirement 3).

P4A-1A: Journalizing reversing entries Requirement 1: Unadjusted balance at the end of October 31, 2012 Salary payable Salary expense

P4A-1A : Journalizing reversing entries Requirement 2: At the end of month adjusting and journal entries: Journal DATE ACCOUNTS AND EXPLANATIONS POST. REF. DEBIT CREDIT

P4A-1A: Journalizing reversing entries Adjusting and closing entries Salary payable Salary expense

P4A-1A : Journalizing reversing entries Requirement 3 The following month, November, 2012: Journal DATE ACCOUNTS AND EXPLANATIONS POST. REF. DEBIT CREDIT

P4A-1A : Journalizing reversing entries Cash payment for salary expense: Cash Salary payable Salary expense

P4A-1A : Journalizing reversing entries Requirement 4 Situation: Using Reversing entry, repeat Req. 1 - 3 Journal DATE ACCOUNTS AND EXPLANATIONS POST. REF. DEBIT CREDIT

P4A-1A: Journalizing reversing entries Salary payable Salary expense

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