What does a reversal of entries error entail?

A reversal of entries error occurs when debits are recorded as credits and credits are recorded as debits. This fundamental mistake can significantly impact the financial statements, as it alters the balance of accounts and distorts the financial position of the entity. For instance, if a cash sale is meant to increase cash (a debit) and revenue (a credit), recording it in reverse would decrease both cash and revenue on the balance sheet and income statement. This type of error can lead to incorrect profit calculations and financial misstatements, making it crucial to identify and correct such errors promptly to ensure accurate financial reporting.

Other options address different types of errors but do not accurately describe a reversal of entries error. For example, making entries in the incorrect order typically refers to a sequencing issue, while an incorrect representation of a transaction relates to omissions or misstatements, not the reversal of debits and credits. Lastly, the legitimacy of an omitted transaction pertains to whether a transaction has been included in the records at all, which is distinct from the nature of reversing entry errors.