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View Full Version : Prepaid insurance who to credit and debit


chelleyhay
Jan 27, 2007, 03:06 PM
How much is expensed on a 18600 prepaid two year insurance?

Thanks

CaptainForest
Jan 27, 2007, 04:28 PM
More details please.

When was this policy purchased, when did it go into effect and what is the current date that you are looking at?

sajalarora
Jan 28, 2007, 06:58 PM
When you have paid such an amount you would have passed the entry as:

Prepaid insurance a/c... dr 18600
To cash / bank a/c 18600

Now , when your 1st closing accounting date you will treat such amount as an expense so,

Insurance a/c... dr 9300
To prepaid ins. 9300

This is debited with the first year insurance amount

Similarly for the next year you do the same.

CaptainForest
Jan 29, 2007, 01:54 AM
My eyes must be failing me quite bad because when I read this question, I don't remember seeing the words, “two year”

Since this is a 2 years policy, the answer that sajalarora has provides is correct.

Time of Purchase:
Dr. Prepaid Insurance 18,600
Cr. Cash 18,600

Year End Adjustment:
Dr. Insurance Expense 9,300 (18,600 x .5)
Cr. Prepaid Insurance 9,300