On oct 2007 I renewed the insurance for my car, I received the new policy and the amount is 13,000 for 13 months. I only paid the said amount early 2008. What would be my entry on oct and Dec 31, 2007? Should I record payable for the whole amount which is 13,000 or the expense portion only which is 3,000?

I take it the insurance is effective from Oct 1, 2007 until Oct. 32, 2008? (13 months)

I also assume your year end is Dec. 31?


Assuming the above…

Oct. 1
Dr. Prepaid Insurance 13,000
Cr. Insurance Payable 13,000

Dec. 31
Dr. Insurance Expense 3,000
Cr. Prepaid Insurance 3,000

Early 2008:
Dr. Insurance Payable 13,000
Cr. Cash 13,000

Summary: Record the asset when you agreed to it. Just because you were given some time to pay it, does not mean you didn't have access to the asset.