(Note, we are not discussing entries that reverse errors, this discussion is for entries that reverse accruals.)

1. What are reversing entries and when are they done?
2. Why are reversing entries prepared?
3. Which company would be more likely to use reversing entries and why?
   • A small company with three employees who are paid no benefits
   • A large company with 1,000 employees who have vacation, insurance and many other different types of benefits

I am not looking for a textbook definition - I am looking for you to demonstrate that you understand what reversing entries are and why they are used!