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Annual insurance premium paid on January 1, 2015 was Rs. 2,400. What will be the opening entry on April 01, 2015, if financial year ends on March, 31 every year.
- a)Insurance Premium A/c Dr. 1,800. To Prepaid Insurance Premium 1,800
- b)Ins. Prem. A/c Dr. 600. To Prepaid Ins. Premium 600
- c)Prepaid Ins. Prem. A/c Dr. 1,800. Prepaid Ins. Premium 600. To Insurance Premium 1,200
- d)Prepaid Insurance Premium A/c Dr. 600. To Insurance Premium 600
Correct answer is option 'A'. Can you explain this answer?
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Annual insurance premium paid on January 1, 2015 was Rs. 2,400. What w...
Opening Entry for Prepaid Insurance Premium:
The opening entry for prepaid insurance premium on April 01, 2015, can be calculated by dividing the annual insurance premium by the number of months covered in the financial year. Since the financial year ends on March 31, the number of months covered is 3 (January, February, and March).
Calculation:
Annual Insurance Premium = Rs. 2,400
Number of Months Covered = 3
Prepaid Insurance Premium = Annual Insurance Premium / Number of Months Covered
Prepaid Insurance Premium = Rs. 2,400 / 3
Prepaid Insurance Premium = Rs. 800
Therefore, the opening entry for prepaid insurance premium on April 01, 2015, will be:
Insurance Premium A/c Dr. 1,800
To Prepaid Insurance Premium 1,800
Explanation:
The opening entry for prepaid insurance premium is a journal entry that records the amount of insurance premium paid in advance for the upcoming months. In this case, the insurance premium paid on January 1, 2015, covers the months of January, February, and March. Hence, the remaining three months (April, May, and June) are considered as prepaid insurance premium.
The journal entry debits the Insurance Premium account with the amount of insurance premium paid in advance (Rs. 1,800) and credits the Prepaid Insurance Premium account with the same amount (Rs. 1,800). This entry reduces the Insurance Premium account balance and increases the Prepaid Insurance Premium account balance.
This entry is necessary to adjust the accounts for the remaining months of the financial year and to ensure that the financial statements reflect the correct amount of insurance expense for the period.
The opening entry for prepaid insurance premium on April 01, 2015, can be calculated by dividing the annual insurance premium by the number of months covered in the financial year. Since the financial year ends on March 31, the number of months covered is 3 (January, February, and March).
Calculation:
Annual Insurance Premium = Rs. 2,400
Number of Months Covered = 3
Prepaid Insurance Premium = Annual Insurance Premium / Number of Months Covered
Prepaid Insurance Premium = Rs. 2,400 / 3
Prepaid Insurance Premium = Rs. 800
Therefore, the opening entry for prepaid insurance premium on April 01, 2015, will be:
Insurance Premium A/c Dr. 1,800
To Prepaid Insurance Premium 1,800
Explanation:
The opening entry for prepaid insurance premium is a journal entry that records the amount of insurance premium paid in advance for the upcoming months. In this case, the insurance premium paid on January 1, 2015, covers the months of January, February, and March. Hence, the remaining three months (April, May, and June) are considered as prepaid insurance premium.
The journal entry debits the Insurance Premium account with the amount of insurance premium paid in advance (Rs. 1,800) and credits the Prepaid Insurance Premium account with the same amount (Rs. 1,800). This entry reduces the Insurance Premium account balance and increases the Prepaid Insurance Premium account balance.
This entry is necessary to adjust the accounts for the remaining months of the financial year and to ensure that the financial statements reflect the correct amount of insurance expense for the period.
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Annual insurance premium paid on January 1, 2015 was Rs. 2,400. What w...
The correct answer is: Insurance Premium A/c Dr. 1,800. To Prepaid Insurance Premium 1,800.
The insurance premium paid on January 1, 2015, is Rs. 2,400. The financial year ends on March 31 every year, which means the premium covers 12 months (January to December). Since the opening entry is on April 1, 2015, three months (January, February, and March) of the insurance premium have already been used.
Here's a detailed breakdown of the calculation:
1. Determine the monthly premium:
- Total premium: Rs. 2,400
- Duration: 12 months
- Monthly premium: Rs. 2,400 / 12 = Rs. 200
2. Calculate the used and unused portions of the premium:
- Used portion (January to March): 3 months x Rs. 200 = Rs. 600
- Unused portion (April to December): 9 months x Rs. 200 = Rs. 1,800
3. Create the opening entry on April 1, 2015:
- Insurance Premium A/c Dr. 1,800
- To Prepaid Insurance Premium 1,800
This entry shows that the total insurance premium paid (Rs. 2,400) is divided into two parts: the used portion (Rs. 600) and the unused portion (Rs. 1,800). The opening entry on April 1, 2015, reflects the remaining unused portion of the insurance premium (Rs. 1,800) as a prepaid insurance premium, which will be used in the following nine months (April to December).
The insurance premium paid on January 1, 2015, is Rs. 2,400. The financial year ends on March 31 every year, which means the premium covers 12 months (January to December). Since the opening entry is on April 1, 2015, three months (January, February, and March) of the insurance premium have already been used.
Here's a detailed breakdown of the calculation:
1. Determine the monthly premium:
- Total premium: Rs. 2,400
- Duration: 12 months
- Monthly premium: Rs. 2,400 / 12 = Rs. 200
2. Calculate the used and unused portions of the premium:
- Used portion (January to March): 3 months x Rs. 200 = Rs. 600
- Unused portion (April to December): 9 months x Rs. 200 = Rs. 1,800
3. Create the opening entry on April 1, 2015:
- Insurance Premium A/c Dr. 1,800
- To Prepaid Insurance Premium 1,800
This entry shows that the total insurance premium paid (Rs. 2,400) is divided into two parts: the used portion (Rs. 600) and the unused portion (Rs. 1,800). The opening entry on April 1, 2015, reflects the remaining unused portion of the insurance premium (Rs. 1,800) as a prepaid insurance premium, which will be used in the following nine months (April to December).
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Annual insurance premium paid on January 1, 2015 was Rs. 2,400. What will be the opening entry on April 01, 2015, if financial year ends on March, 31 every year.a)Insurance Premium A/c Dr. 1,800.To Prepaid Insurance Premium 1,800b)Ins. Prem. A/c Dr. 600. To Prepaid Ins. Premium 600c)Prepaid Ins. Prem. A/c Dr. 1,800.Prepaid Ins. Premium 600. To Insurance Premium 1,200d)Prepaid Insurance Premium A/c Dr. 600. To Insurance Premium 600Correct answer is option 'A'. Can you explain this answer?
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Annual insurance premium paid on January 1, 2015 was Rs. 2,400. What will be the opening entry on April 01, 2015, if financial year ends on March, 31 every year.a)Insurance Premium A/c Dr. 1,800.To Prepaid Insurance Premium 1,800b)Ins. Prem. A/c Dr. 600. To Prepaid Ins. Premium 600c)Prepaid Ins. Prem. A/c Dr. 1,800.Prepaid Ins. Premium 600. To Insurance Premium 1,200d)Prepaid Insurance Premium A/c Dr. 600. To Insurance Premium 600Correct answer is option 'A'. Can you explain this answer? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about Annual insurance premium paid on January 1, 2015 was Rs. 2,400. What will be the opening entry on April 01, 2015, if financial year ends on March, 31 every year.a)Insurance Premium A/c Dr. 1,800.To Prepaid Insurance Premium 1,800b)Ins. Prem. A/c Dr. 600. To Prepaid Ins. Premium 600c)Prepaid Ins. Prem. A/c Dr. 1,800.Prepaid Ins. Premium 600. To Insurance Premium 1,200d)Prepaid Insurance Premium A/c Dr. 600. To Insurance Premium 600Correct answer is option 'A'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Annual insurance premium paid on January 1, 2015 was Rs. 2,400. What will be the opening entry on April 01, 2015, if financial year ends on March, 31 every year.a)Insurance Premium A/c Dr. 1,800.To Prepaid Insurance Premium 1,800b)Ins. Prem. A/c Dr. 600. To Prepaid Ins. Premium 600c)Prepaid Ins. Prem. A/c Dr. 1,800.Prepaid Ins. Premium 600. To Insurance Premium 1,200d)Prepaid Insurance Premium A/c Dr. 600. To Insurance Premium 600Correct answer is option 'A'. Can you explain this answer?.
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