Ask Experts Questions for FREE Help !
Ask
    whiteboard1's Avatar
    whiteboard1 Posts: 1, Reputation: 1
    New Member
     
    #1

    Jan 20, 2009, 07:42 AM
    Prepaid expense timing
    Hello! Trying to determine the proper recording. If company year end is Dec 31st, and a prepaid contract is paid for on Dec 15th, but the contract is for Jan 1 - Dec 31st of the next year, do you still record as a prepaid expense, despite having no contract service till the next year? What else would you debit?
    pready's Avatar
    pready Posts: 3,197, Reputation: 207
    Ultra Member
     
    #2

    Jan 20, 2009, 05:05 PM

    An example is Prepaid Insurance. You purchase insurance for a Year.

    the first journal entry to record the transaction is:
    Debit Prepaid Insurance for the amount paid.
    Credit Cash for the amount paid.

    to record the usage of the insurance the journal entry is:
    Debit Insurance Expense for the amount used. (Amount of insurance/12 = amount used per month)
    Credit PrePaid Insurance for the amount

Not your question? Ask your question View similar questions

 

Question Tools Search this Question
Search this Question:

Advanced Search

Add your answer here.


Check out some similar questions!

Adjusting entry for prepaid expense [ 1 Answers ]

If I am adjusting my prepaid expense, I would debit my prepaid expenses for the amount I'm adjusting but what would I credit? I know normally you would credit prepaid insurance or whatever the expense is for but I do not have an account of pre-paid insurance.. is there such a thing of making an...

Prepaid expense and income [ 1 Answers ]

If an insurance policy for 2 years was entirely expense in one year. How do I correct this error? Ex: if policy for 2 years is 12,000 and it all expense in one year, the income would be understated by 6,000?:confused: The correct entry would be: Insurance expense 6,000 Prepaid...

Prepaid expense correct entry [ 2 Answers ]

I'm still not clear of how to correct the prepaid expense. Let's say... I paid 20,000 for 5 years of insurance and I charge all to expense account on the first year... the correct entry should be: First year... Debit insurance expense 4,000 Debit prepaid insurance 16,000 Credit R.E...

Prepaid Insurance & salary expense [ 1 Answers ]

1st question My comp paid 15000 to cover a 3 year insurance premium. One year has elapsed. I came up with 5000 for insurance expense incurred this year and 15000 is how much we paid for insurance this year. Is this correct? 2nd question Accrued 20000 of salary expense at the end of year 1 then...

Moving Expense and Traveller Expense [ 1 Answers ]

Brief History: I came to US on F1 in 2001 and graduated in 2003. I have been employed from October, 2003 on my OPT and my H1 started in May, 2004. I changed my employer in 2004 and in 2005 I had to leave the country to be with my family in my home country. I was out of the country from April 2005...


View more questions Search