### Reversing Entries: Determining the Need for Reversing Entries**Objective:**Identify which adjusting entries made at the end of an accounting period are to be reversed at the beginning of the following period.**Task:**Analyze the following four adjusting entries made on December 31 and determine whether a reversing entry is needed.**Adjusting Entries:**| Date | Description | Debit | Credit | Reversing Entry Necessary | Reversing Entry Not Necessary ||-----------|-----------------------|--------|--------|----------------------------|--------------------------------|| Dec. 31 | Utilities Expense | $565 | | | || | Utilities Payable | | $565 | ○ | ○ || 31 | Deferred Rent Revenue | $1,550 | | | || | Rent Revenue | | $1,550 | ○ | ○ || 31 | Advertising Expense | $450 | | | || | Prepaid Advertising | | $450 | ○ | ○ || 31 | Taxes Expense | $1,750 | | | || | Taxes Payable | | $1,750 | ○ | ○ |#### Notes:- A reversing entry is an entry made at the beginning of the reporting period to reverse or cancel adjusting journal entries made at the end of the previous period.- Reversing entries are optional and are generally performed to simplify the recording of transactions in the new period. ##### Detailed Instructions:1. **Identify Adjustments:** - Assess the nature of each adjusting entry. - Determine if the entry involves accruals or deferrals.2. **Determine Reversibility:** - If the entry involves accrued expenses or revenues (like Utilities Payable or Rent Revenue), a reversing entry is usually necessary. - For entries involving prepayments (such as Advertising Expense or Prepaid Advertising), it could depend on company policy or specific use cases.3. **Mark Necessity:** - Indicate in the appropriate column ("Reversing Entry Necessary" or "Reversing Entry Not Necessary").##### Practical Example: Consider the adjusting entry for Utilities Expense of $565 and Utilities Payable of $565. Since this involves an accrued expense

Adjustment entries are the same as the journal entries with the only difference being that it is…

Certain adjusting entries made at the end of an accounting period are reversed at the beginning of the following period. Required: Analyze the following four adjusting entries made on December 31, and determine whether a reversing entry is needed. Date Description Debit Credit Reversing entry Reversing entry necessary not necessary Dec. 31 Utilities Expense 565 565 1,550 1,550 450 450 1,750 O 1,750 S ? Utilities Payable 31 Deferred Rent Revenue Rent Revenue 31 Advertising Expense 31 Taxes Expense Prepaid Advertising Taxes Payable O O O X

Certain adjusting entries made at the end of an accounting period are reversed at the beginning of the following period. Required: Analyze the following four adjusting entries made on December 31, and determine whether a reversing entry is needed. Date Description Debit Credit Reversing entry Reversing entry necessary not necessary Dec. 31 Utilities Expense 565 565 1,550 1,550 450 450 1,750 O 1,750 S ? Utilities Payable 31 Deferred Rent Revenue Rent Revenue 31 Advertising Expense 31 Taxes Expense Prepaid Advertising Taxes Payable O O O X

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Subject: accounting
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