On April 1, 2011, a company paid a $16,200 premium on a 36-month insurance policy for coverage beginning on that date. Refer to that policy and fill in the blanks in the following table.



Balance Sheet: Prepaid Insurance
Dec. 31, 2011
Accrual Basis:
Cash Basis:

Dec. 31, 2012
Accrual Basis:
Cash Basis:

Dec. 31, 2013
Accrual Basis:
Cash Basis:

Dec. 31, 2014
Accrual Basis:
Cash Basis:

Income Statement: Insurance Expense
Dec. 31, 2011
Accrual Basis:
Cash Basis:

Dec. 31, 2012
Accrual Basis:
Cash Basis:

Dec. 31, 2013
Accrual Basis:
Cash Basis:

Dec. 31, 2014
Accrual Basis:
Cash Basis:

Cash basis means when cash is received or spent, so in cash basis when you purchase the insurance policy you would expense it.

In Accrual basis when you purchase insurance you are paying in advance of the insurance being used(expensed).

In the prepaid account you would take your insurance cost and divide it by 3 to get the amount of insurance used or expensed for one year.

To get the balance for your prepaid account for every year simply subtract the insurance expense from your beginning year balance.

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