Example: Year-end adjustment and reversal entry                   
Goal: assign expenses to December for a bill that spans December/January when your fiscal year end is December 31.

Assumptions in this example:

1. It is December 31, 2015 – the final day of your fiscal year.
2. Each month, you are billed $3,000 for a property lease – the bill covers the 15th of that month to the 14th of the next month.
3. You have to record the portion of the lease expense that was incurred in December 2015 (December 15th to December 31st), which is $1,500.

On December 31st, you'd record an adjustment:

1. Click Adjustments in Flare's main menu (1 below).
   
   
   
   
2. Select December 31st as the adjustment date (3 below); Debit the Rent Expense account for $1,500. Select the vendor's name (4).
   
   
   
   
3. Credit Accounts Payable for $1,500. Select the vendor's name (5 above).
4. Enter a description in the Memo field (6). For example, "To record the December portion of December 2015/January 2016 lease expense".
5. Check Add reversal entry and select January 1, 2016 as the reversal date (7).
6. Click the Save button (8). The transaction is recorded in Flare—increasing Rent Expense by $1,500 and decreasing Accounts Payable by $1,500.

The December portion of the expense has been accurately recorded to the correct fiscal year (2015).

What happens in January, 2016?

On January 1, 2016, the reversal entry will automatically debit the Payable by $1,500, zeroing the December 31st entry, and, will credit Rent Expense by $1,500, resulting in a negative rent expense of $1,500 for January's portion of the December/January bill. On January 5th, you pay the $3,000 rent for December/January. You would record a check of $3,000, selecting a bank account to credit and the Rent Expense account to debit. See Bank Transactions > Record a check.

Note: remember that in this example, you have a -$1,500 Rent Expense balance because of the reversal entry recorded on January 1st, 2016. Upon recording the check for $3,000, the Rent Expense account would have a balance of $1,500 (the $3,000 check less $1,500 from the reversal entry) which accurately reflects the portion of rent expense incurred for January 1st to 14th, 2016.