The Purpose of Reversing Entries Is To

question 145

Multiple Choice

The purpose of reversing entries is to:

• A) simplify the recording of certain journal entries in the future.
• B) correct an error made in a previous journal entry.
• C) ensure that closing entries have been properly posted to the ledger accounts.
• D) make certain that only permanent accounts are carried forward into the next accounting period.
• E) complete a required step in the accounting cycle.

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Definitions:

Unit Product Cost

The total cost (fixed and variable) incurred to produce, store, and sell one unit of a product.

Net Operating Income

A financial metric that shows how much profit a company generates from its core business operations, excluding expenses from interest and taxes.

Absorption Costing

An accounting practice that includes the total manufacturing costs, which are direct materials, direct labor, and manufacturing overhead (both variable and fixed), in the valuation of a product.

Net Operating Income

A financial metric representing a company's income after operating expenses but before interest and taxes.