Jan 8, 2008, 08:07 AM
What is the journal entry for prepaid insurance still in force... please it is urgent
Jan 8, 2008, 09:38 PM
Not sure what you mean by "still in force" but the journal entry for prepaid insurance would be to debit the amount you are increasing the prepaid insurance for and credit any amount you are using.
Jim opens a lawn care business and as part of operations, buys a one year accidental death policy with his insurance company. He pays 1,000 dollars for the entire year. So his initial entry would be to debit "prepaid insurance" 1,000 dollars, and credit "cash" 1,000 because he adjusting two assets and moving money from the cash account to the prepaid insurance account.
Now, one month later, Jim has expensed a month's worth of the insurance policy, so he would debit the "insurance expense" account 83.33 and credit the "prepaid insurance" account 83.33.