Welcome Guest. Register Now!  



Reply
 
LinkBack Thread Tools Search this Thread Display Modes
  #1 (permalink)  
Old 03-19-2017, 06:02 PM
Junior Member
 
Join Date: Mar 2017
Posts: 2
Reversing Entries for Accrued Revenue and Deferred Revenue Accounts

We have some accrued receivable entries which were never billed and never reversed. They have been on the books since 2011 and need to be removed. The same goes for the deferred revenue account. There were adjusting entries made every year since 2011, but none of the reversing entries were made. How do we go about fixing this?



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
  #2 (permalink)  
Old 03-19-2017, 08:31 PM
Moderator
 
Join Date: Oct 2010
Posts: 5,258
Unearned revenue is a liability account on a company's books. The company?s accountants must keep adjusting the balance sheet and income sheet over the course of the service. Reversing entries are made on the first day of an accounting period in order to remove certain adjusting entries made in the previous accounting period. Reversing entries are used in order to avoid the double counting of revenues or expenses and to allow for the efficient processing of documents. Reversing entries are most often used with accrual-type adjusting entries.
The adjusting entries will continue until the company has fulfilled its obligation of goods or services and the liability to the customer reaches zeroThese entries are often used to account for expenses on an accrual or deferred basis



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
  #3 (permalink)  
Old 03-19-2017, 10:26 PM
Junior Member
 
Join Date: Mar 2017
Posts: 2
I understand this but

The reversing entries were never made and there is a large balance now left in the the accrued receivables account on the balance sheet that I need to zero out since that amount was not billed nor received. How do I do this?



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
  #4 (permalink)  
Old 03-20-2017, 06:08 AM
Moderator
 
Join Date: Oct 2010
Posts: 5,258
Quote:
Originally Posted by user1234 View Post
The reversing entries were never made and there is a large balance now left in the the accrued receivables account on the balance sheet that I need to zero out since that amount was not billed nor received. How do I do this?
Balances occur largely in accounts receivable on cash basis books for ; Postings to balance sheet accounts;Receipts unapplied to invoices. Similarly, balances occur largely in accounts payable cash basis books for Postings to balance sheet accounts;Checks written against accounts payable and not applied to bills.

You neeed to make the Closing Entries by preparing an T/B and adjusted t/b and income statement, Closing all income statement accounts that have a credit balance by debiting them with the amount of the credit balance and posting the same amount as a credit to the temporary income summary account. For example, if you have three income accounts with credit balances of $5k $20k and $75krespectively, you need to debit each account with the amount of its credit balance to close it and credit the income summary account with $100k, Closing the income statement accounts that have debit balances. You need to credit the account with the amount of its balance to close it and debit the income summary account with the same amount. For example, if your utilities account has a debit balance of $5k at year-end, credit utilities and debit income summary account with $5k, Calculating the balance on the income summary account and close the account by transferring the balance to the owner's capital account for a sole proprietor, or to the retained earnings account for a corporation. For example, if the business has made a $50k profit for the year, the income summary account will have a credit balance of $50k. You neeed to debit the income summary account and credit the owner's capital or retained earnings account with $50k, Transfering owner's drawings to the owner's capital account, or dividend accounts to the retained earnings account. Drawings and dividend accounts will usually have debit balances; credit drawings or dividends and debit owner's capital or retained earnings account.
Depending on your accounting software, you might have the option to record journal entries for accrued expenses as automatic reversals. This means that as soon as you close the prior accounting period, either monthly, quarterly or annually, your first entries will typically be the reversing entries. Automatic reversals save time and effort, because you do not need to input journal entries manually



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
Ads
Reply



Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

vB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Final Return and Unearned Revenue karnog S-Corporation 3 01-01-2015 09:47 PM
Cost of revenue? tylergoo Sole-Proprietorship 1 04-13-2014 02:21 AM
S-Corp no revenue ntkn S-Corporation 1 02-16-2012 12:01 AM
s-corp with small revenue kkv1 S-Corporation 5 01-08-2012 03:58 PM
IRS audits a small client with Revenue $65,000! MikeCPA CPA Forums 1 04-08-2011 12:02 AM

Follow us on Facebook Follow us on Twitter Google Buzz Rss Feeds

» Categories
 
Individual
 » Income
 » IRA/Sep
 » Medical
 
Corporations
 » Payroll
 
Forum for CPAs
 
Financial Planning
 
 
 

» Recent Tax Q&A
No Threads to Display.