Originally Posted by user1234
The reversing entries were never made and there is a large balance now left in the the accrued receivables account on the balance sheet that I need to zero out since that amount was not billed nor received. How do I do this?
Balances occur largely in accounts receivable on cash basis books for ; Postings to balance sheet accounts;Receipts unapplied to invoices. Similarly, balances occur largely in accounts payable cash basis books for Postings to balance sheet accounts;Checks written against accounts payable and not applied to bills.
You neeed to make the Closing Entries by preparing an T/B and adjusted t/b and income statement, Closing all income statement accounts that have a credit balance by debiting them with the amount of the credit balance and posting the same amount as a credit to the temporary income summary account. For example, if you have three income accounts with credit balances of $5k $20k and $75krespectively, you need to debit each account with the amount of its credit balance to close it and credit the income summary account with $100k, Closing the income statement accounts that have debit balances. You need to credit the account with the amount of its balance to close it and debit the income summary account with the same amount. For example, if your utilities account has a debit balance of $5k at year-end, credit utilities and debit income summary account with $5k, Calculating the balance on the income summary account and close the account by transferring the balance to the owner's capital account for a sole proprietor, or to the retained earnings account for a corporation. For example, if the business has made a $50k profit for the year, the income summary account will have a credit balance of $50k. You neeed to debit the income summary account and credit the owner's capital or retained earnings account with $50k, Transfering owner's drawings to the owner's capital account, or dividend accounts to the retained earnings account. Drawings and dividend accounts will usually have debit balances; credit drawings or dividends and debit owner's capital or retained earnings account.
Depending on your accounting software, you might have the option to record journal entries for accrued expenses as automatic reversals. This means that as soon as you close the prior accounting period, either monthly, quarterly or annually, your first entries will typically be the reversing entries. Automatic reversals save time and effort, because you do not need to input journal entries manually