Insurance Owing Journal Entry
The balance in the liability account accounts payable at the end of the year will carry forward to the next accounting year.
Insurance owing journal entry. Recording journal entries for insurance premiums are also similar. This is accomplished with a debit of 1 000 to insurance expense and a credit of 1 000 to prepaid insurance. This will result in a compound journal entry. On december 31 the company writes an adjusting entry to record the insurance expense that was used up expired and to reduce the amount that remains prepaid.
The balance in repairs maintenance expense at the end of the accounting year will be closed and the next accounting year will begin with 0. Effect of prepaid expenses on financial statements the initial journal entry for a prepaid expense does not affect a company s financial statements. In this second scenario we record the loss the difference between the value of the asset lost and the amount of the claim of 10 000. Dr insurer debtor 50 000.
The company paid a 50 down payment and the balance will be paid after 60 days. The insurance provider charges an annual fee called a premium which will cover the business for 12 months. 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. Insurance expense journal entry an insurance expense occurs after a small business signs up with an insurance provider to receive protection cover.
There is an increase in an asset account debit service equipment 16 000 a decrease in another asset credit cash 8 000 the amount paid and an increase in a liability account. Cr insurer debtor 50 000. On december 7 the company acquired service equipment for 16 000. The journal entry would be.
The adjusting entry for accounts payable in general journal format is. Since you are using cash your cash will fall and prepaid insurance will rise but total assets will stay the same. 2 000 will be subtracted from the prepaid account and is shown as an expense in the income statement for that reporting quarter the income statement for the quarter ending will show an expense of 2 000 under the line item of insurance expense. Cr storeroom asset 60 000.
This adjusting journal entry will be passed every month by the company for the next 12 months in order to prepare and present the correct monthly financial statement of the company after which the balance of prepaid rent and insurance account will become nil.
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