2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16
In accounting, there is such a thing as reversal. Such an operation is quite often used in practice and is important in correcting various digital values.
Reversal is an opportunity to make things right
A reversal entry is used in accounting practice to correct erroneous entries. In other words, a reversal is a transaction with a minus. In an accounting system, you cannot simply delete an entry, especially if it concerns past periods. To ensure that the actions of the accounting officer are clear to the inspecting authorities, the reversed entry completely duplicates the erroneous one, it is only reflected in the registers with a minus sign. Very often, such wiring is called "red". The presence of two mutually canceling entries is a clear example that the accountant has corrected the error. Storno is a correction, not a distortion or deletion of information. If you do not make a negative posting, but simply remove the erroneous amount, then this will lead to incorrect reporting.
A reversal entry is always made only in the period in which the error was found. In the system of double entry of accounts, violation of the reversal rules can lead to unjustified overestimation of turnover. Atcorrecting a partial amount, the red posting is made for the difference discovered. Storno is an officially permitted posting, which is regulated by the rules for maintaining a chart of accounts.
If accounting is kept on paper, then when entering the reversed amount into the statement, it is circled in red ink. When calculating totals, the negative entry is subtracted from the total.
Reversal of documents in the accounting program
Most often, accounting entries are formed in settlement programs after a certain document has been posted. When conducting a reversal of the previous period, it is most correct to minus the entire document. This operation ensures that no additional account correspondences resulting from the posting of the primary document will be lost.
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