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Accounting for insurance renewal
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?
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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. |
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