Reversing entry: when and how to use it in 2026

Quick answer. A reversing entry contra-posts on 1 January N+1 a year-end accrual booked on 31 December N (typically in French PCG accounts 408 or 418), so that the final invoice received or issued in N+1 is recorded only once. In 2026, the mechanism remains essential: the French tax doctrine (BOFiP BOI-BIC-CHG-10-30 and BOI-BIC-BASE-20-10) requires strict matching of expenses and income to the correct fiscal period, and the General Chart of Accounts updated on 1 January 2026 by ANC Regulation 2014-03 still uses accounts 408, 418, 486 and 487 to organise the cut-off.

French inventory rules — set out in article L123-12 of the Commercial Code — require every company to control the value of its assets and liabilities at least once a year and to match each expense and income to the period in which it was incurred. The PCG applicable from 1 January 2026, published by the Autorité des Normes Comptables (ANC, the French accounting standards authority), still uses account 408 "Suppliers — invoices not received" (accrued expenses / FNP) and account 418 "Customers — unbilled receivables" (accrued income / FAE), alongside deferral accounts 486 "Prepaid expenses" and 487 "Deferred income".

At Hayot Expertise, the 2026 closing season highlights three drivers that put reversing entries back at the heart of the accounting process and close cycle:

• the roll-out of mandatory e-invoicing between French VAT-registered businesses, which reduces some accruals but shifts the focus to audit-trail quality (FEC, structured e-invoice, journal entries);
• growing tax pressure on period matching: the French tax authority uses BOI-BIC-CHG-10-30 and BOI-BIC-BASE-20-10 to add back an expense whose liability was not "certain in principle and amount" at year-end, or conversely to tax acquired income that was not recognised;
• the multiplication of manual reversals in cloud tools: Pennylane, Cegid Loop, Sage 100, Quadra, Tiime, MyUnisoft and EBP Open Line do not all handle automatic reversal in the same way, which generates double counting when settings are not checked.

A French industrial SME recently asked us to investigate a €47,000 variance discovered in the N+1 results review: an accrued expense (408) had been reversed manually in January while the software had also reversed it automatically on 1 January, doubling the reversal effect, understating the result, and going undetected for six months.

A reversing entry is a symmetrically opposite entry to a year-end accrual, posted at the very beginning of the next period to neutralise the original effect once the final supporting document is booked normally in N+1. It is a cut-off mechanism: it ensures that revenue and expenses are matched to the period in which they were earned or incurred, without being counted twice when the actual invoice is received or issued.

It is mainly used for:

• accrued expenses (CAP / FNP) in account 408: services received but not yet invoiced at year-end (professional fees, subcontracting, marketing, utilities);
• accrued income (PAR / FAE) in account 418: services performed on 31/12 but not yet invoiced (subscription fees, long-term contracts, commissions);
• certain year-end adjustments for accrued interest on borrowings (1688), accrued holiday pay (4282) or related social charges (4382), depending on the internal accounting policy.

A reversing entry is neither a cancellation nor an error correction: it is a planned process entry whose trace must remain readable for account reviews and any subsequent tax or statutory audit.

A reversing entry is never an error correction. If the original accrual was miscalculated, it must first be corrected in N before being reversed in N+1.

Below are the two most common journal patterns under PCG 2026.

Case 1 — Accrued expense (account 408)

Assumption: €1,000 of services consumed in December, invoice expected in January.

Year-end 31/12/N:

• Debit 6xx (External expenses): €1,000
• Credit 408 (Suppliers — invoices not received): €1,000

Reversal on 01/01/N+1:

• Debit 408: €1,000
• Credit 6xx: €1,000

Final invoice received in January N+1 (VAT 20%):

• Debit 6xx: €1,000
• Debit 44566 (Deductible VAT): €200
• Credit 401 (Suppliers): €1,200

Net result: the expense is correctly reflected — €1,000 in N (via the accrual), €0 net in N+1 (reversal and invoice cancel out on the 6xx account; only supplier payable 401 and VAT 44566 remain).

Case 2 — Accrued income (account 418)

Assumption: €2,000 of services delivered in December, invoiced in January.

Year-end 31/12/N:

• Debit 418 (Customers — unbilled receivables): €2,000
• Credit 7xx (Services rendered): €2,000

Reversal on 01/01/N+1:

• Debit 7xx: €2,000
• Credit 418: €2,000

Invoice issued in January N+1 (VAT 20%):

• Debit 411 (Customers): €2,400
• Credit 7xx: €2,000
• Credit 44571 (Collected VAT): €400

A five-step procedure helps secure each reversal:

1. Identify the nature of the year-end entry (accrual, accrued income, prepaid expense, deferred income, provision for risk) before deciding whether it should be reversed.
2. Document the supporting evidence (quote, purchase order, contract, progress report) that makes the liability or receivable certain in principle and amount — as required by BOFiP BOI-BIC-BASE-20-10.
3. Configure the software with the "reverse on 01/01" flag and check the effective date, without leaving both automatic and manual reversals in place.
4. Track in the review file the link between the year-end entry, its January counterpart and the final invoice (document reference, batch number, free-text comment).
5. Reconcile accounts 408 and 418 monthly during the early months of the year to detect any N accrual left orphaned.

Accounts 486 and 487 are not reversed: they unwind naturally over N+1 as the service is consumed (rent paid in advance in December for January, annual subscription billed in July). Likewise, provisions for risks and charges follow their own tax and accounting regime and are reversed through account 78xx when the risk disappears.

• Self-employed (auto-entrepreneur) and cash-basis BNC: no cut-off, no reversal — but watch the VAT threshold and the option for the actual regime.
• SAS, SARL, SCI subject to corporate income tax: standard reversal on 01/01/N+1, to be coordinated with the tax return (form 2058-A) for any adjustments.
• Holding companies and consolidated groups: accruals and unbilled receivables must be reconciled between subsidiaries and parent to avoid double counting at consolidation level.
• Companies with off-calendar year-ends (30/06, 30/09): the reversal is posted the day after closing, not on 1 January. The "calendar-year reflex" is a common source of error.
• Public contracts and stage billing (4181): revenue is recognised at provisional or partial acceptance of the contract; reversal occurs at final invoicing.
• Firms using Tiime, Pennylane or Cegid Loop production tracking: automatic reversal is reliable, provided the option is activated at the initial accrual entry and no manual parallel reversal is posted.

Our experience on bookkeeping and account review missions in Paris highlights five recurring errors:

1. Forgetting to reverse a 408 or 418: the expense or income is recorded twice in N+1, distorting the result by several thousand euros.
2. Doubling the reversal (manual + automatic): opposite effect, as in the industrial SME case above.
3. Confusing reversal and error correction: a material error on a closed period falls under PCG article 122-5, not under a simple contra-entry.
4. Failing to trace the link between the N entry, the January reversal and the final invoice: the tax auditor or statutory auditor cannot reconstruct the audit trail, jeopardising the FEC and reliable audit trail requirement.
5. Recording VAT on 408/418: in principle VAT is not booked until the invoice is received or issued. Internal policies sometimes use account 44586 (VAT on invoices not received) but this requires strict reconciliation.

Hayot Expertise tip. Before each closing, we recommend drafting a one-page internal cut-off note: materiality threshold, complete list of expected 408 and 418 accounts, reversal method (automatic or manual), and January-February review timetable. This document becomes the centrepiece of the monthly close support and accelerates 2026 account reviews.

The progressive roll-out of mandatory B2B e-invoicing in France (compulsory reception by all VAT-registered businesses from 1 September 2026, and issuance in two waves in 2026 and 2027) changes the timing of accrued expenses. In a well-configured e-invoice workflow, part of the suppliers' invoices arrive before year-end and accruals are no longer necessary. Result: fewer 408 accruals, but more targeted ones on services genuinely not invoiced at 31/12.

Conversely, accrued income (account 418) remains fully relevant: customer invoicing still follows the commercial cycle (milestones, deliverables, end of month), and tax matching to the period of execution remains mandatory under BOFiP BOI-BIC-BASE-20-10. For firms and businesses assessing the practical impact of the reform, our 2026 e-invoicing readiness test helps map the gap between current processes and the new obligations.

We too often see reversing entries treated as a technical detail. That is a mistake: they are in fact an indicator of the maturity of your closing process. Companies that master their cut-off share three characteristics. First, they formalise a written policy (thresholds, accounts concerned, software automation). Second, they hold a dedicated review of accounts 408 and 418 in January-February, rather than a month later when variances are buried in the noise. Third, they use monthly reviews to spot orphan accruals immediately, instead of waiting for the next year-end. At Hayot Expertise, this discipline is integrated into our Paris 8 accounting expertise and outsourced CFO for startups and SMEs missions, precisely because a mishandled cut-off is one of the first warning signs an auditor or investor looks at during a due diligence review.

Hayot Expertise tip. If your 2026 closing generated more than 20 entries in accounts 408 or 418, set up a monthly cut-off review now — half a day a month is enough. You will avoid the February stress peak and know exactly where each accrual stands when the next year-end approaches.

• A reversing entry is a planned process entry posted on 01/01/N+1 to neutralise a year-end accrual (408) or unbilled receivable (418) and avoid double counting in N+1.
• Accounts 408 and 418 are the main candidates for reversal; accounts 486 and 487 (prepaid / deferred items) unwind naturally.
• The PCG applicable on 1 January 2026 (ANC Regulation 2014-03) and the BOFiP (BOI-BIC-CHG-10-30, BOI-BIC-BASE-20-10) strictly govern the matching of expenses and income to the period in which they were incurred.
• 2026 e-invoicing reduces some accruals but does not abolish the cut-off; unbilled receivables remain fully relevant.
• Duplicating a reversal (manual + automatic) has become the most frequent error in cloud software — settings must be checked systematically.
• A short but structured internal cut-off note secures both the close and the reopening better than any late catch-up work.