One major advantage of using reversing entries is that they allow accounting systems to reflect expenses in the periods they occurred (Weygandt, Kimmel, & Kieso 2015). Entries that require reversing are those entered into accounting systems to allocate expenses that span two or more accounting periods.
For instance, if an interest for loan payment is due on 14th of every month, only one half of the entry is applicable in the current month while the other half of the entry is applicable to the next month. The major disadvantage of using reversing entries is the high possibility of accountants forgetting to make the entries (Hahn-Carlson, Beck, & Suits 2010).
The errors that result from forgetting to make the entries lead to underrated or overrated accounts. Another disadvantage of using reversing entries is that it gives double work for accountants. Making reversal entries requires efficient systems that track the entries to ensure that they complete successfully.
Accounting systems that require the accountants to make the entries manually require the accountants to do double work (Hahn-Carlson, Beck, & Suits, 2012). The chances of errors also increase with the increase in the amount of manual work. Reversal entries are optional because even without them, single entries of revenues generated can be accounted for at the end of all the periods that the revenue spans. The only advantage of reversal entries is that they allow the recording of expenses for every revenue generated in every period (Hahn-Carlson, Beck, & Suits, 2012).
Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2015). Financial & Managerial Accounting. John Wiley & Sons.Hahn-Carlson, D. W., Beck, E. A., & Suits, D. A. (2010). U.S. Patent No. 7,822,653.
Washington, DC: U.S. Patent and Trademark Office.Hahn-Carlson, D. W., Beck, E. A., & Suits, D. A. (2012). U.S. Patent No. 8,126,785. Washington, DC: U.S. Patent and Trademark …