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    phantasma's Avatar
    phantasma Posts: 3, Reputation: 1
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    #1

    Oct 14, 2008, 11:15 AM
    How would I record an entry
    How would I recoed an entry for dec.31st , for a policy bought for 7,200 on October 1st?
    pready's Avatar
    pready Posts: 3,197, Reputation: 207
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    #2

    Oct 18, 2008, 01:56 PM

    if the policy is for insurance I would Debit Prepaid Insurance for the amount and Credit Cash (if cash was paid) or Accounts Payable (if on account) on October 1.

    if there were no other transactions posted during the accounting period then I would figure out how much of the policy was used.

    If the Policy was for 1yr then I would take the $7,200 X 3(months Used)/12(months in a year) which equals $1,800.

    The adjusting entry in this case is:
    Debit the Insurance Expense account for 1,800
    Credit the Prepaid Insurance account for 1,800
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