REVERSAL ENTRIES FOR FINAL ACCOUNTS

System

hi everybody

I'm studying intermediate with Kaplan and I'm working as accounts assistant.

Every end of the month I have to close the accounts and pass some reversal entries for accruals, prepaymnents and wages.

I'm wondering..this is a very important step when closing the accounts, why there is no metion of this in Unit 5? It shows where to post the balance from the trial balance into the balance sheet or profit and loss and that's it!

I found this reversal entries a surprise and I'm still don't understand why they are necessary for the final acconts.

Many thanks

System

Re:REVERSAL ENTRIES FOR FINAL ACCOUNTS

I also do the same thing at work and wondered about this. I was told that it is because each month the amount of accruals and prepayments need to be amended and the easiest way to do this is take them out and post the ones for the current month. I assume you use an accruals schedule which calculates the amount to be posted for each item. If you look at this then you can see from month to month the adjustment that needs to be made.

eg you have prepaid an item for £120 say for 12 months rent this equates to £10 per month. At end of January the prepayment will be £110 at the end of February the prepayment will be £100 (the other £20 having been used as payment for that month)

System

Re:REVERSAL ENTRIES FOR FINAL ACCOUNTS

exactly Jac this is what I'm doing at the end of each month and I keep a spreadsheet with all the calculations.

I'm still wondering why this process is not covered in Unit 5 as it's a very common practise at the workplace!

System

Re:REVERSAL ENTRIES FOR FINAL ACCOUNTS

IN my last job we only did it once a year at year end.

We certainly have been taught it as part of Unit 5, but since the exams are not 'real life' but watered down to test specific practice it is not something that appears to be emphasised.