[safat]

Hi I need to know How I can post reversing etry in to the general ledger ?
For example if I have
The business last paid a water bill in May, which was for 3 months of water expense up to the end of April. The additional accrual entry for water expense for the last two months is $2,290.
And I want to write the reversing entry on 1st of Jun
Is this write ?
Water expense incurred but not paid ref DR CR
Jun 1 Water Payable 222 $1,145
Jun 1 Water Expense 542 $1,145

And If I want to post it in the ledger
Account: Water Payable
Account No. 222
Date Description Ref. DR CR Balance
May 31 Balance $1,030 CR
Jun 1 Water Expense GJ $1,145 $115 DR


AND
Account: Water Expense
Account No. 542
Date Description Ref. DR CR Balance
May 31 Balance 0
Jun 1 Water Payable GJ $1,145 $1,145 CR


Are these all correct?
Can you please help me I'm confused. I don't know if this is right.
Thanks

[morgaine300]

Something seems really off here. First, I'm ignoring the bill paid in May because it's irrelevant. It was an expense through April, having nothing to do with May or June, and if it was in a payable, should be gone because it was paid. If there is some reason this has any bearing on this, you'll have to tell me what it is.

From the "reversing" entry you are attempting to do, it looks like you accrued the 2290 as
Dr. Water Expense 2290
Cr Water Payable 2290
This is merely an assumption because of how you're trying to do your reversing entry. If that is wrong, you'll have to let me know. (I'm having to make too many assumptions because your information is too lacking. I can't know what entry you actually made there.)

But you claim this was an accrual for "the last two months." I do not understand that at all. What last two months? If you paid everything that was an expense through April, and this accrual happened in May, then why are you recording two months? Surely your utility company is not billing in advance. There is an implication there that they have already billed both May and June, up front.

IF they are actually billing up front for May and June, and IF you made the above entry with the 2290, then you'd have to reverse out half of the expense part by crediting it, because you can't have expense in the future that hasn't occurred yet. That would bring the expense down to 1145 for just May. However, IF it were actually billed in advance, then it would still be a payable, but it's also a prepaid. It's not uncommon to get bills in advance, put them in a payable (i.e. not yet paid), and yet then also call them a "prepaid" even though they aren't paid. (You won't see that in a book, but it happens in real life.) But I still don't get the idea of them billing in advance for two months that haven't happened yet. I've never known something like water to bill in advance.

IF they billed two months in advance, I would have put it all into a prepaid account, and then at the end of May, as an adjusting entry, I would have taken half (1145) out of the prepaid and expensed it. Another method is to charge the whole thing off to the expense, but to then pull out 1145 from the expense and put it into the prepaid. (i.e. the opposite. As long as 1145 goes into the expense and 1145 is in the prepaid when you get done, it doesn't matter which direction you do it.) But you haven't involved a prepaid at all. That's also an adjusting entry at 5/31, not a reversing entry.

The whole thing doesn't make much sense to me.

Where did the 1030 already in Water Payable come from? If only 1030 was due, what happened to the 2290? And how can you take 1145 out if 1030 is due? How do you owe a negative $115?

And how come there is nothing in the Water Expense account prior to this time? What happened to May's expense? You only recorded up through April. Even if May is your fiscal year-end, then starting in June you'd have no expense, but you would have expense in there at the end of May. How did that get zero?

No, none of it makes much sense to me. If you could explain much more clearly what actually happened, what you got billed, when you paid what amounts and how you recorded the original entries, I might be able to make more sense of it. But as it is, it doesn't make sense and I have a feeling you didn't record it correctly to begin with.

I also kind of don't get the idea of doing this as a reversing entry. If you are planning to debit the expense when the whole thing gets paid, that would actually catch up the expense account so it's correct. But since it's going to come out of cash when you pay it, your payable is still messed up. The point of a reversing entry is so that when you go to pay something (or receive something), you don't have to mess with figuring out which portion is in the payable already and which portion has been expense already, etc. But this isn't the way to go about it. What entry were you intending to make when you pay the bill? For that matter, when is it due and being paid?

Way too many unanswered questions here.

[vrajesh]

What is the reverse entry for Advance paid?

[vrajesh]

Hat is the reverse entry for Advance paid?

[morgaine300]

There shouldn't be one. (And next time, please start your own thread.)