The income statement account Insurance Expense has been increased by the $900 adjusting entry. The journal entry is: As Accrual Entry or Recurring entry ? The money gets from company B, then company A can have the insurance. How to do this ? 1. The adjusting journal entry for Prepaid Insurance is: Note that the ending balance in the asset Prepaid Insurance is now $600—the correct amount of insurance that has been paid in advance. Example of Prepaid Insurance. Doing so records the incurring of the expense for the period and reduces the prepaid asset by the corresponding amount. Receive the cash from the insurance company. Journal Entry should be: Dr. Prepaid insurance: 24,000 Cr. Prepaid Stationary Cost. The adjusting entry would be different (Debit: Prepaid Insurance 2,250; Credit: Insurance Expense 2,250) but will yield the same effect to the account balances. As the amount of prepaid insurance expires, the expired portion is moved from the current asset account Prepaid Insurance to the income statement account Insurance Expense. The adjusting entry for prepaid expense depends upon the journal entry made when it was initially recorded. If you are paying cash, you are again increasing one asset account at the expense of the other because both cash and prepaid insurance are assets.

This is usually done at the end of each accounting period through an adjusting entry.

It has a prepaid expense of 15,000.

Insurance expense refers to the expired premium paid by a business to an insurer. To begin posting journal entries for prepaid expenses, first debit an asset account. Learn everything you need to know about insurance expense: definition, classification and presentation, journal entries, and examples. If you put this journal entry to a prepaid account in your financial statements, you spread the $12,000 across all 12 months of the year.

A company pays $60,000 in advance for directors and officers liability insurance for the upcoming year. Prepaid expenses can also be used when you get billed for an expense that covers a period of time to come (eg insurance that covers a whole year) and you want to allocate the expense correctly to each month.

Record the prepaid expenses journal entry in your books before using the good or service. The following journal entries will be recorded by the company: The following journal entry is made to accommodate a prepaid expense: Dr. Prepaid Expense A/c (a newly opened account) Cr. Why Accrual Accounting Works for Prepaid Expenses 1,00,000 paid as on 1st June, 2009 the entry will be made as per below : Dr. Insurance premium Rs. Since you are using cash, your cash will fall and prepaid insurance will rise but total assets will stay the same. The recording of the prepaid expense is in two parts: The payment of cash to create the prepayment on the 1 January.