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    wolffr's Avatar
    wolffr Posts: 2, Reputation: 1
    New Member
     
    #1

    Oct 7, 2011, 05:04 PM
    Accounting basic equation : effect of salaries payable, insurance expense and prepaid
    Hi,

    I want to know what's the effect on the basic equation of:
    - salaries payable
    - insurance expense
    - prepaid insurance.

    Thanks
    wolffr's Avatar
    wolffr Posts: 2, Reputation: 1
    New Member
     
    #2

    Oct 7, 2011, 05:26 PM
    Salaries payable:
    increase the salaries credit (+)
    increase the salaries expense (-)

    Insurance expense:
    decrease the cash (-)
    increase insurance expense (+)

    Prepaid insurance:
    I don't know
    pready's Avatar
    pready Posts: 3,197, Reputation: 207
    Ultra Member
     
    #3

    Oct 8, 2011, 03:33 PM
    When purchasing Prepaid Insurance you will increase Prepaid Insurance (a current asset) and decrease Cash (a current asset).

    When posting insurance for the period you will have an increase to Insurance Expense (an expense account) and a decrease to Prepaid Insurance (a current asset).

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