Final answer:
Adjusting entries for accrued revenues, accrued expenses, and prepaid expenses should be reversed to prevent financial discrepancies. They allow for proper matching of income and expenses within the relevant accounting periods.
Step-by-step explanation:
Adjusting entries that should typically be reversed include those for accrued revenues, accrued expenses, and prepaid expenses. The purpose of reversing entries is to prevent double counting of revenues or expenses when the actual invoice or payment is processed in the new accounting period. For example, if an accrued expense is recorded at the end of one month, a reversing entry will be made at the beginning of the next month, so that when the expense is actually paid, the expense is not recorded twice.
Accrued revenues are incomes earned but not yet received, and the adjusting entries made for them are reversed so that when the actual revenue is received, it is recorded in the correct period. Similarly, accrued expenses are expenses that are recognized before they are paid for, and a reversal ensures that they are not paid again in the new period. Prepaid expenses, on the other hand, are payments made for goods or services to be received in the future. A reversal entry adjusts for the portion of prepaid expenses that becomes an actual expense in the new period.