Final answer:
Adjusting entries for prepaid expenses and unearned revenues are reversed in order to simplify the accounting process for the new period, allowing for easier recording of actual expenses incurred or revenues earned.
Step-by-step explanation:
Adjusting entries that should be reversed include those for prepaid or unearned items. When a company pays for goods or services in advance, a prepaid expense account is debited to show the service or item has been paid for and an asset is created. As the prepaid service or product is used or the time passes, an expense is recorded, moving the cost from the asset account to an expense account.
At the end of an accounting period, adjusting entries for prepaid expenses and unearned revenues are made to account for these changes. To simplify the accounting process in the new period, these entries can be reversed. When the reversing entries are made at the beginning of the new period, as the actual expenses are incurred or revenues are earned, they can be recorded in their entirety without the need to allocate them between periods.