**Prepayment of Insurance Premium in Balance Sheet and Insurance Account**

**Balance Sheet:**

In a balance sheet, the prepayment of insurance premium will be recorded as a current asset. It represents the amount paid in advance for insurance coverage that extends beyond the current accounting period. The balance sheet is a financial statement that provides a snapshot of an entity's financial position at a specific point in time. The prepayment of insurance premium will be included under the current assets section.

**Insurance Account:**

The insurance account is a nominal account that records the expenses incurred for insurance coverage. It is a part of the income statement or profit and loss statement, which presents the revenue, expenses, and net profit or loss of an entity for a specific period. The prepayment of insurance premium will be debited to the insurance account.

**Explanation:**

When a business entity pays an insurance premium in advance, it is considered a prepayment because the coverage extends beyond the current accounting period. This means that the entity has paid for insurance coverage for a future period.

To record the prepayment of insurance premium, the following journal entry is made:

**Insurance Account Debit**
**To Cash/Bank Account Credit**

This journal entry debits the insurance account, which increases the expense incurred for insurance coverage. It also credits the cash/bank account, reducing the amount of cash or bank balance.

In the balance sheet, the prepayment of insurance premium will be shown as a current asset. Current assets are assets that are expected to be consumed or converted into cash within one year or the operating cycle of the business, whichever is longer. The prepayment of insurance premium meets this criteria as it represents an amount paid in advance for insurance coverage that extends beyond the current accounting period.

Under the current assets section of the balance sheet, the prepayment of insurance premium will be listed along with other current assets such as cash, accounts receivable, and inventory. It will be reported at its original cost and not the amount allocated to the specific period.

Overall, the prepayment of insurance premium will appear in the balance sheet as a current asset and in the insurance account as an expense. This reflects the advance payment made by the business entity and the recognition of the expense incurred for insurance coverage.