Prepaid exp amortization query

Is this in Your personal account or business account...??

What insurance this...???

Please give some details then the reply can be based on the reply

This is not a down payment, you made a delayed payment

However insurance is a prepaid expense no matter when you pay for it.

Dr. PRepaid insurance

Cr. Bank

and 

Dr. Insurance expense

Cr. Prepaid insurance

This is how complete amortisation happens. Upon renewal itd be an expense

This is for USA medical insurance premium of an Business LLC entity and 3743 paid on 22 jan and rest payment will be made in 3 quarterly instalment

• Suppose the annual premium for the insurance policy is Rs. 20,000 and it is paid in four equal installments of Rs. 5,000 each. The policy is redeemable for Rs. 25,000 after 2 years.

Dr. Prepaid insurance

Cr. Bank

(Repeat this for the four instalments)

If expired insurance is 10k

Dr. Insurance expense 10k

Cr. Prepaid insurancce 10k 

(Repeat this for the 2 years)

on redemption

Dr. Bank 25k

Cr. Insurance revenue 25k

Besides its hard tell like Mr. Raja PM said without knowing contact terms. You can also recognise

Dr. Prepaid insurance 20k

Cr. Bank 5k

Cr. Payables 5k and rest of the tings will be same

@ Sandeep Sharma,

Still Your query is clear. bcoz, bill raised full value (14972) or four bills like quater wise...

But, I give the reply based on your query with my understanding...

Entry for Insurance booking:

Dr. Medical Insurance - Rs. 14,972/-
Cr. Supplier A/c - Rs. 14,972/-

For Prepaid Insurance Entry:

Dr. Prepaid Medical Insurance - Rs. 11,229/-
Cr . Medical Insurance - Rs. 11,229/-


The above entries for full value of insurance. In caase the Insurance provider give bill every quarter like after payment then prepaid not required.
You can account evry 3 months only...

Prepaid insurance is a current asset

Another thing is accruals need not be used all the time. It depends upon the benefits like if risks and rewards are transferred or not. Eg. you purchase machinery, risks and rewards are transferred to you. You purchase insurance, the contract might say only after paying full amount, you'll be eligible to make a claim in case of emergency. In that instance, when there is no benefit, you can just pass normal Dr. Prepaid insurance Cr. Bank entries x 4 times. 

Prepaid insurance and accruals are not telated

You got it wrong. Accruals deals with full recognition of assets and liabilities. This is the case with above as its recognized in full when there is no future economic benefit nor rewards if the contract mentions 4 instalments are mandatory. Rest is fine if that is not the contract. 

It is clear now...thanku Raja and Yasawi

Anytime Mr. Sandep. 

Originally posted by : Sandeep Sharma
	It is clear now...thanku Raja and Yasawi

You are welcome...