[RunnerUK]

Hi,

If I have to enter into my journal the following two entries:

Signed a 2 year rental agreement on a warehouse; paid $36,000 cash in advance for the first year

Paid $3,000 cash for a one year insurance policy

Do I subtract the portion of each payment related to the month, enter them as expenses and the rest goes into two separate pre-paid accounts?

Many thanks.

[CaptainForest]

Hello,

Basically, yes.

Let's take “Paid $3,000 cash for a one year insurance policy”

If you got that policy on Feb. 1, on that day you would:
Dr. Prepaid Insurance 3,000
Cr. Cash 3,000

After 1 month, you would:
Dr. Insurance Expense 250
Cr. Prepaid Insurance 250
3,000 / 12 = 250

Of course, you wouldn't do it EVERY month unless you were preparing financial statements every month.