if an insurance policy for 2 years was entirely expense in one year. How do I correct this error?

ex: if policy for 2 years is 12,000 and it all expense in one year, the income would be understated by 6,000?:confused:

the correct entry would be:

Insurance expense 6,000
Prepaid insurance 6000
Retained Earning 12,000

so the entry that you made in first year was

Insurance expense 6,000
Prepaid insurance 6000
Retained Earning 12,000

but it shud have been

Insurance Exp 12,000
Cash 12,000
Since you expensed the whole amount .....I dont understand why are you going thru the R/E method.

Then the second year u shud have got

Prepaid Insurance 6,000
Insurance expense 6,000

Since you already paid. But it depends on the books and company. If the books were corrected before the year end as they have to report their taxes. you also have to watch whether the fiscal period end is as same as the year end date.