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:

Cost of Goods Sold

Costs directly associated with the manufacturing of products that a business sells.

Collection Period

The standard timeframe for a corporation to collect receivables from its clientele.

Receivables Period

is the average number of days it takes for a business to collect payments from its customers after a sale has been made, indicating the efficiency of its credit and collection policies.

Credit Sales

Transactions where the customer buys goods or services on account, paying the supplier at a later date.