In a situation where you\u2019ve once booked an expense for a certain event, purchase etc. and it later on turns out there isn\u2019t going to be a need for it either in full amount or not at all you\u2019ve got to reverse the expense. Note here that you\u2019ve essentially done nothing wrong that is to say that you do not need to go back and start making adjustments. No. Why? Simply because of the fact that it was your best estimate at the time and as such there\u2019s no reason to go and adjust for it, but merely if need be reverse the expense in the period it became apparent that the actual amount is going to be of less or none at all.<\/p>\n
Reversing an expense is actually really easy if you think about it. Normally you\u2019d make the following entry to book for an expense:<\/p>\n
Db Expense account<\/span> Now in a case you want to take back some or all of the expense your new entry is as follows:<\/p>\n Db Payable \/ Liability account<\/span> Essentially what you do is decrease the liabilities in the amount needed and reduce the expense account by the same sum. Yes, it may be that the initial expense was in another period and with this entry the expense account will show as a result a positive amount. It\u2019s supposed to. And that\u2019s that really. I know accountants that find the idea of an expense account going into positive rather difficult to get used to, but it\u2019s something that happens. Nothing wrong about and if need be and it\u2019s possible to do so, you can always add an extra note if the whole balance is hence positive (i.e. on the annual report etc.)<\/p>\n","protected":false},"excerpt":{"rendered":" In a situation where you\u2019ve once booked an expense for a certain event, purchase etc. and it later on turns out there isn\u2019t going to be a need for it either in full amount or not at all you\u2019ve got to reverse the expense. Note here that you\u2019ve essentially done nothing wrong that is to […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[25,40],"tags":[],"class_list":["post-2893","post","type-post","status-publish","format-standard","hentry","category-1-basic-accounting","category-1-12-expenses"],"aioseo_notices":[],"_links":{"self":[{"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/posts\/2893","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/comments?post=2893"}],"version-history":[{"count":2,"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/posts\/2893\/revisions"}],"predecessor-version":[{"id":2896,"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/posts\/2893\/revisions\/2896"}],"wp:attachment":[{"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/media?parent=2893"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/categories?post=2893"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/tags?post=2893"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
\n Cr Payable \/ Liability account<\/span><\/p>\n
\n Cr Expense account<\/span><\/p>\n