Reversals:

At the beginning of each accounting period, there is an accounting practice to use reversing entries to cancel out the adjusting/accrual entries that were made to accrue revenues and expenses at the end of the previous accounting period. Use of Reversing Entries makes it easier to record subsequent transactions by eliminating the possibility of duplication.

Reversing entries are made on the first day of an accounting period in order to offset adjusting accrual/provision entries made in the previous accounting period.

Reversing entries are used to avoid the double booking of revenues or expenses when the accruals/provisions are settled in cash.

A reversing entry is linked to the original adjusting entry and is written by reversing the position of debits with credits and vice versa.

Net impact of Original Entry and Reversing Entry on the accounting books is always zero.

In Automated Accounting Systems, it is not possible to delete transactions once the posting has been made. In such systems reversals is the recommended way to correct the erroneous entries. An example is that one interface feed has been posted by mistake twice. This has inflated many income expense accounts. A reversing entry with opposite debit and credit amounts to all the impacted accounts will nullify the impact of the mistake.