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Reviewing Accruals and Deferrals

6 May, 2015 - 17:39

Although all accruals and deferrals require adjusting entries at the end of an accounting period, reversing entries are not necessary for all adjustments. Reversing entries should only be performed under the following circumstances:

  1. when an accrued asset or an accrued liability is adjusted,
  2. when a prepaid expense is initially recorded as an expense,
  3. when an unearned revenue is initially recorded as revenue.