Examples of Accrual Reversal

The following examples describe how accrual reversals are scheduled and accounted.

Example 1

A company receives materials worth 100 (USD) on the 30th of the month but hasn't been invoiced. The following journal entry is created when the material is received to record the accrual.

This table contains a journal entry.

Account	Entered DR	Entered CR	Accounted DR (USD)	Accounted CR (USD)
Accrual Expense	100.00		100.00
Accrual Liability		100.00		100.00

The accrual reversal accounting date is set to First Day of Next Accounting Period. The following journal entry is created to reverse the accrual.

This table contains the reversal journal entry.

Account	Entered DR	Entered CR	Accounted DR (USD)	Accounted CR (USD)
Accrual Liability	100.00		100.00
Accrual Expense		100.00		100.00

Example 2

Future trading requires a margin account that's market-to-market on a daily basis. This means that the investor or ledger's gains or losses on the position are reflected on a daily basis. If the margin account is less than a specified amount (the maintenance of the margin), a margin call is issued. This requires the holder of the account to replenish the account to the initial margin level or close out the position.

The investor or ledger must mark the account to market each day. The entry booked from the day before must be reversed to reflect the new position.

Journal Entry Creation

• The following journal entry creation date is June 1, 2006.

• Accounting date: 01-Jun-2006

This table contains the journal entry.

Account	Entered DR	Entered CR	Accounted DR (USD)	Accounted CR (USD)
Loss	100.00		100.00
Margin Liability		100.00		100.00

Reverse the Journal Entry

• The accrual reversal accounting date is set to Next Day. The following journal entry is created to reverse the journal entry from June 1.

• Accounting Date: 02-Jun-2006

This table contains the journal entry.

Account	Entered DR	Entered CR	Accounted DR (USD)	Accounted CR (USD)
Margin Liability	100.00		100.00
Loss		100.00		100.00

Reflect the New Position

• On June 2, a new journal entry is created to reflect the new position, which will be reversed on June 3.

• Accounting Date: 02-Jun-2006

This table contains the journal entry.

Account	Entered DR	Entered CR	Accounted DR (USD)	Accounted CR (USD)
Loss	105.00		105.00
Margin Liability		105.00		105.00

Reverse the Accrual

• On June 3, the following journal entry is created to reverse the accrual from June 2.

• Accounting Date: 03-Jun-2006

This table contains the journal entry.

Account	Entered DR	Entered CR	Accounted DR (USD)	Accounted CR (USD)
Margin Liability	105.00		105.00
Loss		105.00		105.00