Hey guys. I am new to this site and it's very nice to meet you all.
I have a question about the accounting of my business. On Aug 31, 2006 I bought Commercial Insurance. The total premium for one year is $7,701.00. I made a deposit of $1,911.75 and the balance to be paid in equal monthly installments until the end of the policy period. This is what I did:
Balance of policy as of 11/01/06 was $5,789.25 So, I added the deposit of $1,911.75 =7,701.00 / 12 = $ 641.75

8/31/06 Dr Insurance Expense $1,911.75
Cr Cash $1,911.75

11/1/06 Dr Prepaid Insurance $1,270.00
Cr Insurance Expense $1,270.00

11/1/06 Dr Insurance Expense 641.75
Dr Prepaid Insurance 1.50
Cr Cash 643.50

12/1/06 Dr Insurance Expense 641.75
Dr Prepaid Insurance 1.50
Cr Cash 643.50

That is the monthly entry I made every time I receive the invoice. My balance sheet shows a balance of $1,279.00 as of today, which is confusing me. What part was wrong and what exactly I need to correct?
Thanks a million
ndz

i dont know exactly what you are asking but the formula for finding insurance expense is
cost of annual policy/12=cost per month x months used = insurance expense

I am sorry. My question was if the calculation and entries are correct. The asset account shows a balance of $1,279.00 and keeps increasing every time I post the invoice. I just need to know if the entries that I've made during the year are correct.

Now, if the asset account increases every month that I pay the invoice, at what point is that balance going to dissapear from my balance sheet.

If I have to make an adjusting entry, what would be the correct one?
Thanks
NDZ