 In this presentation, we will enter a reversing entry related to revenue or accounts receivable. In other words, last time we entered an adjusting entry and adjusting entry to bring the revenue back into the correct time period, however, now we need to enter the reversing entry so that we do not have the entry duplicated as of the time it was originally input into the system. Time to rise above the crowd with Sage50Cloud accounting. Here we are in our get great guitars file we're going to be starting off by opening up our financial statements. So we're going to go to the drop down on the reports and forms where the financial statements are. We're going to go into the financial statements. I missed it, but you know where I was going, I'm going into the financial statements and we're going to open up the balance sheet. Let's open up that balance sheet. It's going to be for the month of February, February, and that's the one let's open up the income statement as well. So we'll go back on over and open up the income statement. So income statement. Let's also do that for the month of February. And so we're going to be, I'm going to uncheck these ones so that it doesn't show those zero balances because I don't need them so I don't want to see them. And so here we have it. So here's our income statement. So last time we entered an adjusting entry to pull the accounts receivable back into the correct period because the invoice had been entered, however, it was entered in March and we did the work in February. So we needed to bring the revenue and other related accounts back into February when the actual work was done in accordance with the revenue recognition principle. But now if we don't reverse it, then it's going to be in there twice as of the date of the original invoice, which was actually after the cutoff date in March. So now what we need to do is a reversing entry so that that doesn't happen. So here's our adjusting entry that we did. We need to reverse it now as of the first day in the next time period, which is going to be March 1st. So the easiest way to think about the reversing entry, in my opinion, is to just take the adjusting entry and then reverse it exactly, which seems kind of obvious and straightforward. But honestly, if you look at when people do reversing entries, they often get mixed up because they try to reshuffle the account order to put the debits on top and this and that. And so I wouldn't recommend against that and just and just take this adjusting entry. I'm just going to copy this same whole thing here and I'm just going to say copy this and paste it. By the way, this is the same way that and I'm going to paste it here. You might want to do like a credit memo. I would actually write out the actual sales invoice and then think about the credit memo or something like that, right? And so I'm going to delete the numbers here and then I'm going to, I'm going to re, I'm going to delete basically the indentations so that we just have the account names. Now rather than reshuffling these accounts to try to put the debits on top, I'm just going to say, I'm just going to do the exact opposite of what's over there. I'm just going to say this is going to be a credit now instead of a debit of that number and then we're going to debit instead of crediting this number and we're going to debit instead of crediting this number and then we're going to credit instead of debiting this number and then we're going to debit instead of credit this number. So we just did the exact opposite. I'm just gonna pick this up and do the exact opposite. I'm not gonna try to shuffle these accounts. You might look at this and say, well, these two should be on top because those are the debits. Well, if you start moving the order of the accounts, it really, in my mind, complicates the thing to be able to go from the adjusting entry to the reversing entry. So I would rather just enter it like this. And there's nothing you can do to make honestly this entry look normal because this isn't a normal entry. We don't typically decrease sales that just doesn't typically happen. Cost of goods sold is almost never accredited. It shouldn't happen. And inventory, you know, well, those are the most unusual items of it. So there's nothing you could do to kind of make that normal in the way you record it. So putting the debits on top doesn't really help it. What you wanna think about is to say, to make this fit in your mind, is to say, hey, this is the adjusting entry and I'm simply reversing it exactly. So don't try to think of the reversing entry without first thinking of the adjusting entry. And that's the way I would do it. You're not trying to memorize a whole new thing. You're just saying, hey, that's what we did on the adjusting entry. This is gonna reverse it. Same with a credit memo, I think of it in a similar fashion. So now I'm gonna hide these columns by going from A to D. And then we're just gonna enter this as a reversing entry. I'm gonna right click and hide these columns. And then I'm just gonna enter these as of March 1st. So let's do that. Let's go back on over to our information over here. Back on over and we're gonna go to the tasks drop down and we're going down to the general journal entry. And we're gonna do this general journal entry as of 03.0120. 03.0120, then we're looking for accounts receivable. That's where we start with this thing. So this is gonna be accounts receivable. And obviously 03.0120 is the first day after the cutoff date. That's why we're doing it there. So this is gonna be a reversing entry. And that's gonna be for the amount of the 547.50. So that's a credit. Credit 547.50. And then the other side is gonna be to sales, which I think is 4,000. That's gonna be a debit of 500. I'm pretty sure. Let's double check, I'm almost positive. The debit 500 and then the sales tax payable. Sales tax payable. Going to the sales tax payable. And that's gonna be a liability. So there it is. There it is. That's gonna be for the 47.50. 47.50. Then we have the cost of goods sold. So I'm gonna be looking at the cost of goods sold. It's gonna be down below here somewhere. There it is, cost of goods sold. That's gonna be a credit this time of 400. As can be seen here. Credits of 400 and then inventory. Lastly, we have the inventory. And so there's that. And that's gonna be a debit of 400. So there it is. We have reversed it exactly. Let's go ahead and record this and see what then happens on the financial statement. So I'm gonna go ahead and say save and then close and then go to the financial statements here, here. And we're in the balance sheet. And let's change the date. Let's actually look at the income statement first. If I go to the income statement and now I'm gonna change the date. We're still good as of the end of the cutoff date. In other words, if I double click income, our adjusting entry is still in there pulling this revenue into the current period of February. Now we wanna go to March and we're trying to say, hey, did we make everything okay for the accounting department in March or did we mess them up with our adjusting entry? We made things correct as of the cutoff date, but did we mess up the normal accounting process after the cutoff date? So we're gonna go back in and we're gonna say, see, it goes back to zero here. It's back to zero. Why? If I select the detail, you could see that we have the reversing entry that's gonna basically reverse it out. And that would result in like a negative amount in there until the invoice was entered and these two match out. The 500 and the 500 then tie out and match out to zero so that it's zero. So in other words, as of March, when the invoice was actually entered, there's no revenue recorded because we pulled it into the prior period with the adjusting entry. We then reversed it as of the first of March. So we pulled it back into February. We reversed it as of the first of March. Now you might say, why didn't we reverse it as of March six? Because that's the day the invoice was made. In other words, if you look at the dates from March first to March fifth, it's gonna be wrong. It's not only gonna be wrong, it's gonna be very ugly looking because it's gonna have a negative revenue account on the income statement, which shouldn't happen. So why would we do that? And the reason is because logistically, it works good for us. We don't wanna enter the reversing entry as of anything other than one day. We want all of our reversing entries happening at the same time period. Otherwise, it's hard for us to go figure out where the reversing entries were. So the strategy here is that we want the financial statements to be correct on an accrual basis as of the financial statement date, the end of the month or year. We do that with the adjusting entries. And then we wanna make things logistically easy in the middle. So it's logistically easier for us to reverse this as of the first day, even though it results in five days of it being not technically correct. And we could have fixed that by just entering it as of the sixth day, right? But the added benefit of having those four days be more technically correct is not as great as the benefit of having all of our reversing entries as of the same day, typically. So that's gonna be the rationale there. So then if I close this back out, the other side is gonna be on the cost of goods sold. If we double click on the cost of goods sold, there it is, one same kind of thing. We reversed it out. And then here's the original invoice. Those two things cancel out because the actual cost of goods sold is gonna be reported from a financial statement standpoint in February, and we did that. So then we're gonna go back over to the accounts receivable. If we go into the accounts receivable, let's change the date so that we're in March. So if we change date to be like the range and then we go into March, so let's go into March and say, okay, same thing's happening here for the AR accounts receivable. So then we have it again, the reversing entry happening here and then the actual invoice because we pulled in the receivable to be on the books in February before the cutoff date with the adjusting entry. And then you can do the same for the accounts receivable. I won't do them all. Accounts receivable and the sales tax payable, same concept, same idea you'll have in there. Now, if we look at the subsidiary ledger for the receivable now, we should be closer. We should be off by 300. So I'm gonna go back over here and go to the reports dropdown and we're gonna go into the accounts receivable this time. And then let's take a look at the aged receivables and then scroll all the way down to the bottom all the way down. I got a lot of stuff happening and there's our number. Now this is the end of February. I wanna make this in March. Let's make this with the date here. We'll change the old date to the end of March. And then let's do this again and then I'll scroll it back. This time I'll use the scroll thing because there's a lot of them and maybe this'll be faster. If I just pull this little thingy down to the bottom and then pull out the trusty calculator. Trusty calculator. So we can do some calculating. Here's the 10, 8, 5, 0.55 minus. And then if we go on back to the balance sheet we have minus the 1, 1, 5, 0. 1, 5, 0, hold on. 1, 1, 1, 5, 0.55 and now we're off by 300. And that 300 is that negative amount over here. That's gonna be this negative amount. And we talked about that before but the bottom line is the adjusting entry kinda threw us off between this reconciling difference because we didn't assign a customer to it. We just entered it. So that threw our register off over here because we didn't have a customer. But now we reversed it out and so now we're only off by that negative 300. A similar kind of factor could be involved with the inventory as well because it has a subsidiary ledger that's gonna be tracking the inventory items. So in any case, that's gonna be it for now. Let's get outta here.