Chapter 4, Problem 20Q

To determine

Reversing Entries: Reversing Entries are made at the beginning of the accounting period when the accountant needs to cancel any entry made in the previous accounting period. It is done in order to eliminate any errors that might have occurred in the calculation of the revenue or expenses, and henceforth, increase the efficiency of the financial statements for an improved decision making.

Adjusting Entries: Adjusting entries are made at the end of the accounting period and they are used in the accrual accounting system. They are required when any revenue or expense has not been reported in the books. Therefore in order to rectify these errors, adjusting entries are used.

Interest Payable: Interest payable is a type of current liability which represents the interest amount that has been incurred but has not yet been paid as on that particular date of the balance sheet.

Interest Expense: Interest expense represents the amount of interest that has been incurred on the debt of the company during a particular time period. It is a part of the income statement account.

To Identify: What type of an account balance, if any, will there be in Interest Payable and Interest Expense after the reversing entry is posted, if the adjusting entry for interest payable is reversed.