:confused: In my textbook example, prepaid insurance has been paid and is shown as:

DR prepaid insurance
CR Cash

However, when doing the assigment, the chart of accounts indicates Insurance Expense. So is it as listed above or:

DR prepaid insurance
CR insurance expense


The same thing for rent "Paid three months rent on a lease rental contract, $X:

Is it:

DR Prepaid rent
CR Rent Expenses

or

DR Prepaid rent
CR Cash

When working on a 4 column ledger, which is correct? Thank you for any help, this has really got me confused.

For your first problem…

Let’s say your year end is Dec. 31

On Nov 1 you buy a 12 month insurance policy for $1,200.

Dr. Prepaid Insurance 1,200
Cr. Cash 1,200

On Dec. 31, your adjusting entry (to record 2 of the 12 months of insurance would be)
Dr. Insurance Expense 200
Cr. Prepaid Insurance 200

Which is how you get insurance expense after adjusting entries.


Question 2…
Same principles as question 1