What are the pros and cons of using reversing entries?

What type of transactions may require reversing entries?

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Originally Posted by justice8504

What are the pros and cons of using reversing entries?

What type of transactions may require reversing entries?

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A pro is that it prevents overstating revenues/expenses in the next accounting period.

The entry is the exact opposite of the adjusting entry.

2007
12/31 adjustment Salaries Expense $300
Salaries Payable $300
(Accrued 3 day's wages)

12/31 closing Income Summary $300
Salaries Expense $300

2008
01/01 reversing Salaries Payable $300
Salaries Expense $300

01/02 Salaries Expense $500
Cash $500
(paid 4 day's wages)