Final answer:
Adjusting entries for prepaid expenses and unearned revenues are usually reversed to prevent double counting in the subsequent accounting period and simplify future transactions.
Step-by-step explanation:
The rule that indicates which adjusting entries for prepaid and unearned items should be reversed is based on the nature of the balance sheet account and the related income statement account. Adjusting entries that involve prepaid expenses or unearned revenues are often reversed in the following accounting period.
This is done for two reasons: first, it helps to avoid double counting the expenses or revenues in the next period; and second, it simplifies the recording of future transactions related to those items. For example, if prepaid rent were recorded as an adjusting entry at the end of one period, the reverse entry at the start of the next period would ensure that the rent expense is not counted twice.