Reversing entry
In one sentenceAn entry recorded at the start of the new period that reverses an earlier adjusting entry, making it easier to record the actual invoice when it arrives without duplication.
Simply put
On 31 December you recorded accrued electricity. On 1 January you reverse the entry, so when the bill arrives you record it as an expense as usual, and the reversing entry cancels its effect on January.
A reversing entry is optional, but it prevents the common mistake of recording the expense twice, once through the adjustment and once through the invoice.
Worked example
A workshop recorded accrued electricity of 4,000 SAR on 31 December, then the bill of 4,000 SAR arrived on 10 January.
Reversing entry on 1 January: Electricity expense (credit)4,000 SAR
Recording the bill on 10 January: Electricity expense (debit)4,000 SAR
Effect of December's bill on January expense (4,000 − 4,000)0 SAR
Don't confuse it with
Correcting entryIt is recorded to fix a wrong entry, while a reversing entry reverses a correct adjusting entry.