What is an investment entry?
A voided entry cancels adjustment entries or corrects incorrect journal entries. They are quite common in accounting, particularly in companies that use accrual accounting. In accordance with standard accrual accounting procedures, companies record adjustment entries to accurately reflect account balances. After the accounting period ends, an investment journal entry is required at the beginning of the subsequent posting period to remove the adjustment journal entry. This eliminates the ledger entry and allows the company to keep its ledgers clean.
A common adjustment entry refers to utility charges. Companies that use accrual accounting must record all information in their accounting books to reflect expenses. Because utility bills may arrive at infrequent times, a business may need to post an entry to reflect the expected charge. The standard entry for this would be a debit to utility charges and a credit to month-end provisions, a liability account. The entry usually takes the last day of the posting period as the posting date.
The reversal entry for utility provision has a date listed as the earliest date in the subsequent accounting period. For example, utility provision postings on March 31st and chargeback postings on April 1st. The second entry removes the accrual entry from the general ledger. The competency entry is for informational purposes only; it has no real value to the business as it does not reflect any real expenditure or activity.
Another use for reverse postings is to correct errors posted to a company's ledger. Errors can occur quite frequently in a company's accounting process. These errors can result in incorrectly posted dollar amounts, information posted to incorrect accounts, or double journal entries. To correct the error, an accountant simply reverses the journal entry listing the original debit and credit of the original journal entry in an opposite format. For example, an entry is incorrectly recorded as a debit to office supplies expenses and a cash credit; To correct this, an accountant credits office supplies expenses and debits them in cash.
A company that makes frequent use of the investment income process may need to re-evaluate its overall accounting process. Provisions can be a sign of poor record keeping, such as not receiving invoices on time or posting them in a timely manner. Frequent errors posted in the ledger are also a bad reflection. This means that a company does not have proper oversight and accountants do not record information as they should.