A reversing entry has the same accounts and amounts as an earlier entry with debits and credits swapped. It has two uses:
- Corrections. Posted entries shouldn’t be edited. To fix one, reverse it (and post the correct entry), so the history shows what happened.
- Accruals. A month-end accrual auto-reverses on the first day of the next period, so when the real invoice or payroll posts, the cost isn’t counted twice.
Why it matters
Reversals keep an audit trail intact and keep accruals from double-counting. Construction month-ends lean on them heavily: subcontract work in place, received-not-invoiced material, split-week payroll and the WIP over/under billing entry all reverse the next month.
Worked example
A December 31 payroll accrual for the split week, Dr JC – Labor $18,400 / Cr Payroll Clearing $18,400 (sample data), auto-reverses on January 1. December’s job cost includes the labor; January nets to zero until the actual payroll posts.
Common mistakes
- Accruing without reversing, so the cost is booked twice.
- Back-dating a correction into a closed period.
How os.construction handles it
In the accounting preview, posted entries can only be reversed, never edited, and the original and its reversal are linked both ways. See Correct a posted entry.