Dictionary / Reversal Entries
What does Reversal Entries mean in accounting?
Quick definition
Accrual & timingGeneral journal entries made at the beginning of a new fiscal period to reverse entries for deferrals and accruals made at the close of the preceding fiscal period, in order that income and expense accounts affected may reflect the actual income and expense for the current fiscal period. This term guides how bookkeepers record, classify, and explain related transactions in routine financial reporting.
Read more below
Examples
April 1 undoes last month's wages
You run a collision shop. Your three techs earned $1,280 across Monday March 30 and Tuesday March 31, but payday is Friday April 3 for the whole week. At the March 31 close you already posted the accrual: debit Wage expense $1,280, credit Accrued wages $1,280. On April 1, post the reversal entry: debit Accrued wages $1,280 and credit Wage expense $1,280. When the April 3 payroll run posts the full $3,200 paycheck to Wage expense in QuickBooks Online, April's P&L wage line should net to $1,920, which is April 1–3 only.
A real bean invoice is not this
On May 28 your cafe entered a $640 bill from a coffee roaster for beans delivered that week, coded to coffee cost. That credit is accounts payable, not last month's accrual. On June 1 someone posts a reversal entry debiting Accounts payable $640 and crediting Coffee cost $640, thinking every May entry gets flipped on day 1. That roaster drops off the AP aging and May's coffee cost disappears. Leave the real bill; reversal entries only undo last period's accrual and deferral adjusting entries.
Why it matters
Reversal entries are the day-1 journal entries that undo last period's accrual and deferral adjusting entries so this period's real bills and paychecks can post at full amount and the P&L still shows only this period's share. You will post them at the start of a new accounting period whenever you accrued wages, utilities, or unbilled work at the prior close; most days in between you will not touch them. Skip the reverse and the leftover accrual sits when the real bill or paycheck posts, so you count the same cost twice; reverse a real vendor bill, or mix these up with closing entries that zero income accounts into equity, and you wipe a transaction that should stay.
Keep learning
Start with the bookkeeping basics, then compare software when you are ready to pick a tool.
Getting startedBookkeeping basics for small-business ownersWhat bookkeeping is, the records you need, double-entry in plain English, and a monthly rhythm that fits a 1–50 person shop.Updated October 4, 2026
RolesWhat does a bookkeeper do?A bookkeeper records bills, invoices, and bank activity so your books stay current. See the weekly work, the month-end close, and what they do not do.Updated August 18, 2026
Monthly closeMonthly bookkeeping: what to close each monthMonth-end is the job: reconcile banks and cards, age bills and invoices, check payroll, then read the reports. A close checklist for small-business owners.Updated August 18, 2026
Expense ManagementThe 10 Best Expense Management Software for Small BusinessWe ranked the 10 best expense management tools for small business, scored on features, ease of use, and value, with honest tradeoffs for each.Updated August 8, 2026Frequently asked questions
What is Reversal Entries in bookkeeping?
General journal entries made at the beginning of a new fiscal period to reverse entries for deferrals and accruals made at the close of the preceding fiscal period, in order that income and expense accounts affected may reflect the actual income and expense for the current fiscal period.
When should I use Reversal Entries?
Use Reversal Entries when the transaction facts match its definition and you need the ledger and financial statements to reflect the correct account and period.
What is a common mistake with Reversal Entries?
Reversal Entries is used for reversal entries entries, while Raw Materials covers a related but distinct bookkeeping purpose. Review both terms before posting unusual transactions. A common mistake is applying it by label only instead of checking the underlying transaction details.