Notes and Interest Payable

[@Brownsugar5329]

Thank you for this video, it was really helpful.

[@horimberebertrand3220]

Aren't we supposed to record a reversal of the adjusting entry of December 31 at the beginning of the new accounting period ?

[@TheAccountingProf]

With accrued interest expense, you "can" performing a reversing entry at the beginning of the new period, then record the full expense when the appropriate time comes. However, you don't have to. Recording partial expense in both the old and new period, without a reversal, would achieve the same outcome.

[@horimberebertrand3220]

@@TheAccountingProf the problem is that all the income statement accounts must have a zero balance at the beginning of the new fiscal year. So, is it legal to ignore the reversal entries?

[@TheAccountingProf]

@@horimberebertrand3220 Hi there! So what you are actually referring to are known as "Closing Entries." These zero out the Income Statement balances and update Retained Earnings, and yes, they must be done. Reversing entries are used to undo previous accruals, for example, when an accrual is made in one period for an invoice that won't be received until the following period.

[@horimberebertrand3220]

@@TheAccountingProf thank you for your clarifications!