Pre-paid expenses

Pass the closing entry as under if entire premium debited to Insurance expense account.

Prepaid Insurance Acoount  - Dr.  Rs.30000

To Insurance (Expns)                                            Rs.30000

(Being insurance for the period from 01.04.2013 to 30.09. 2013 is taken to Prepaid insurance A/c - Rs.5000X6 months)

Next year accounts, you reverse the entry.

Insurance (Expns) -Dr       Rs.30000

To Prepaid Insurance Acoount  -      .  Rs.30000

(Being reversal of prepaid insurance ......)

Insurance expenses A/c                             Dr.         30000 

Prepaid Insurance Premium A/c               Dr          30000  

                 To Bank A/c                                                                 60000

Profit & Loss A/c                         Dr       30000

       to Insurance expenses A/c                         30000

Prepaid insurance premium will go to balance sheet under current assets and next year on 30/09/2013, should pass the entry.

Insurance Expenses A/c                    Dr    30000

    to Prepaid Insurance Premium                          30000

I think Sai Prasanna Kumar is not right because insurance exp. paid is Rs .60000 out of which Rs. 30000 is prepaid in F.Y.2012-13.

Entry at the time of payment

Insurance Exp. Dr.   60000

    To Cash/Bank          60000

On 31.03.13

1. Prepaid Exp. A/c  Dr. 30000

        To Insurance Exp.    300000

2. Profit & Loss Dr. 30000

          To Insurance Exp.   30000

On 01.04.2013

Insurance Exp, Dr. 30000

   To Prepaid Exp.    30000

Pulkesh,

No need to pass 2nd entry as on 31.03.2013

2. Profit & Loss Dr. 30000          

To Insurance Exp.   30000

as the insurance expenses is a P& L item i.e, head of account.

 

Thank You so much to all

TOTAL INSURANCE PAID IS RS. 60000

FINANCEIAL YEAR 2012-13

Insurance Pre -Paid(prepaid Expenses CA Group)DR. 60000

 to Bank A/c                                                             CR. 60000

Insurance Expenses A/c                                                                DR. 30000

 to Pre - Paid Insurance                                                                  Cr.  30000

FINANCEIAL YEAR 2013-14

Insurance Expenses A/c                                                                DR. 30000

 to Pre - Paid Insurance                                                                  Cr.  30000

acha ok ok 

Your Query has a simple answer:

1. Insurance A/c                                  Dr.   30000

    Prepaid Insurance A/c                   Dr.   30000

                      To Bank/ Cash A/c                              60000

and after passing this on 1st April,2013 pass a reversal entry as follows:

2. Insurance A/c                                    Dr.   30000

               To Prepaid Insurance A/c                          30000

Hope your doubt is clarified..!!

I agree with  Mr.Gunjan Tulsyan
 

According to me the best possible way of accounting this will be as below;

At the time pf making payment;

Prepaid Insurance A/C...Dr       60,000

                          To Bank                           60,000

Then monthly, recognize the expense part as;

Insurance   A/C..............Dr        5,000

   To Prepaid Insurance A/C              5,000

Thereby at the end of the F.Y you will have the right balance in the prepaid account to carry forward to next year. 

(My answer is purely based on how we used to do it practically in the Corporate world)..

Thanks 

S Menon

thanks for update...