Reversing entry: when and how to use it

Updated March 2026 - A reversing entry is used to cancel, at the start of the following period, an accrual or adjustment entry posted at the previous year-end. It is a classic cut-off mechanism, particularly useful for accrued expenses, accrued income and certain inventory-related entries. In 2026, the real challenge is not the technical journal entry itself, but maintaining consistency between the closing, the reversal and the ongoing monitoring process.

A reversing entry prevents a year-end accrual from artificially distorting the reading of the new period. Without it, an accrual posted at 31 December could be counted twice if the underlying invoice is booked again in January.

It is most commonly used for:

• accrued expenses (charges à payer) — supplier invoices not yet received
• accrued income (produits à recevoir) — services rendered but not yet invoiced
• period-end adjustments: rent, insurance premiums, professional fees

A clean year-end close requires:

• proper matching of income and expenses to the correct period
• a controlled reversal at the start of the new period
• readable documentation for review and audit

Without this, account reviews quickly become confusing. An accountant receiving in January an invoice already provisioned in December must know whether the reversal has been posted — otherwise the expense will be recorded twice.

You can go further with accounting process, accounting monitoring and training accounting entry.

This is a frequent confusion:

• Reversal: the mirror entry is posted on 1 January N+1. The year-end entry remains in N's accounts. This is a process logic, automated in most accounting software.
• Cancellation: the year-end entry itself is deleted or counter-posted. Reserved for entry errors. It modifies the accounts of the reference period.

A reversal is never a correction of an error. If the initial provision was incorrectly calculated, it must first be corrected before the reversal is posted.

Example: accrued expense (account 408)

At close, 31/12/N:

• Debit expense account (6xx): €1,000
• Credit accrued liabilities (408): €1,000

Reversal at 01/01/N+1:

• Debit 408: €1,000
• Credit expense account: €1,000

When the invoice arrives in January:

• Debit expense account: €1,000
• Credit supplier payable (401): €1,000

Result: the expense is recorded exactly once in N+1, with the real invoice.

Example: accrued income (account 418)

At close:

• Debit accrued receivables (418): €2,000
• Credit revenue account (7xx): €2,000

Reversal at 01/01/N+1: mirror entry. When the customer invoice is issued: standard billing entry.

Accounts 486/487 do not generally require reversals: they unwind naturally when the expense or income is actually consumed. On the other hand, 408 and 418 are the natural candidates for reversal.

Most frequent errors#

The most common ones are:

• forgetting to reverse a 408 or 418, which doubles the expense or income in N+1
• reversing the wrong entry or getting the direction wrong
• not documenting the link between the year-end entry and its reversal
• confusing a reversal with a correction of error
• not checking whether the software has automated the reversal at 01/01

Hayot Expertise tip: a reversing entry is a process entry as much as an accounting entry. If the closing calendar is weak, reversals quickly become a recurring source of error.

Since the gradual rollout of mandatory e-invoicing, invoice flows arrive in a more structured way. In a well-configured e-invoice workflow, some accrued expenses disappear because the electronic invoice often arrives before the period ends. Result: fewer 408 provisions needed, but more targeted ones.

Reversals on accrued income (unbilled services, work-in-progress) remain fully relevant in 2026.

We recommend verifying:

1. the purpose of each year-end entry before deciding to reverse it
2. the reversal date and logic (automatic reversal at 01/01 or manual processing?)
3. the audit trail between N's entries and their N+1 counterpart
4. the impact on the monthly monitoring of the first months of the year