Reversal of adjusting entries during closing

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Biji (Querist)
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25 July 2013 During the year end, I passed adjusting entries for outstanding entries like salary, prepaid expenses etc. Do I need to reverse the above entries at the beginning of next year? If yes, how can I do it in Tally? Pls tell me the entries too

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
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25 July 2013 Yes. once the actual expenses booked you can reverse the provision by passing the journal entries

Biji

Biji (Querist)
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26 July 2013 Sir, would u tell how can I pass reverse entries in tally.
Can U mention the adjusting entries that need to be reversed and those which NEED NOT be reversed.
What would be the date of reverse entry, April 1 or after paying the salary; for instance.

Requesting you to spare a few minutes.
Thanks in advance!

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CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
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26 July 2013 Since the expenses entry you can reverse on 1st April only. reversal just credit the expenses and debit the provision. pass through journal

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Biji

Biji (Querist)
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27 July 2013 Sir,
What about Accrued income, Income received in advance, Depreciation etc......
Does all these require adjusting entry on 31st March and reversal entry on 1st April.

Requesting you to help!
Thanks in advance

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
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27 July 2013 Only Provision for expenses need to be reversed. incase any provision made for Income can be adjusted with actual income bills

Depreciation not a provision entry. no need to reverse

Biji

Biji (Querist)
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28 July 2013 Thank you sir.
would u give further clarification on accrued / outstanding income.

Suppose, Rent/ Interest income is outstanding, I will give the entry on 31/3:

Outstanding/ Accrued Rent/ Interest a/c Dr
To Rent / Interest (income) a/c

Is it required me to reverse this entry on 1/4.
If reverse entry is NOT required, please clarify; WHY?

Please tell me the entry for actual income bills.

Also tell, how can I adjust O/s income entry with this entry as suggested by u in your previous reply.

Hope you would tolerate my repeated doubts!

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
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28 July 2013 For provision reversal is 2 types. example

If you are making provision on 31/3/2013 for income

Dr:Accrued income Rs.100
Cr: Income Rs.100

In April-13 you are getting actual bill Rs.105 then 1st type

on 1/4/2013 you can reverse the entire provision of Rs.100 with following entry

Dr: Income Rs.100
Cr: Accrued income Rs.100

pass the actual bill

Dr: Debtors Rs.105
Cr: Income Rs.105

or you can make adjustment entry in April as follows

Dr: Debtors Rs.105
Cr: Accrued income Rs.100
Cr: Income (Difference) Rs.5

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Biji

Biji (Querist)
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28 July 2013 Thank u sir.

In case of income received in advance, do I need to reverse the adjusting entry. What is the accounting entry in this case. Give me an example too

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
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28 July 2013 Income cannot be recognized in advance, what ever you received keep as advance from customer and adjust once the bill is raised

while receiving advance

Dr: Bank
Cr: Advance from customers

while raising bill

Dr: Debtors
Cr: Income

while adjusting

Dr: Advance from customer
Cr: Debtors

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Biji

Biji (Querist)
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28 July 2013 If I get rent in advance?