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Out of insurance paid this year , 3000 is related to next year. Make journal for this?
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Out of insurance paid this year , 3000 is related to next year. Make j...
Journal Entry for Insurance Paid in Advance
Explanation:
When a company pays for insurance in advance, it is important to record the transaction in the accounting books. This is because the payment made in advance is not an expense incurred in the current year but rather a prepaid expense that will be utilized in the future.
Journal Entry for Insurance Paid in Advance
The journal entry for insurance paid in advance is as follows:
- Debit: Prepaid Insurance Account (Amount paid in advance)
- Credit: Cash/Bank Account (Amount paid in cash or bank)
For example, if a company pays $3,000 for insurance in advance for the next year, the accounting entry will be as follows:
- Debit: Prepaid Insurance Account ($3,000)
- Credit: Cash/Bank Account ($3,000)
The prepaid insurance account is a balance sheet account that represents the amount paid in advance for insurance coverage. This account will be adjusted at the end of each accounting period to reflect the portion of the insurance coverage that has been used up during that period.
For example, if the company uses up $1,000 worth of insurance coverage during the first quarter of the next year, the prepaid insurance account will be adjusted as follows:
- Debit: Insurance Expense Account ($1,000)
- Credit: Prepaid Insurance Account ($1,000)
The insurance expense account is an income statement account that represents the portion of the prepaid insurance that has been used up during the accounting period. This account will be closed at the end of the accounting period and transferred to the retained earnings account.
Community Answer
Out of insurance paid this year , 3000 is related to next year. Make j...
Prepaid insurance A/c Dr 3000 To insurance A/c 3000
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Out of insurance paid this year , 3000 is related to next year. Make journal for this?
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Out of insurance paid this year , 3000 is related to next year. Make journal for this? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Out of insurance paid this year , 3000 is related to next year. Make journal for this? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Out of insurance paid this year , 3000 is related to next year. Make journal for this?.
Out of insurance paid this year , 3000 is related to next year. Make journal for this? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Out of insurance paid this year , 3000 is related to next year. Make journal for this? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Out of insurance paid this year , 3000 is related to next year. Make journal for this?.
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