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Prepaid expenses

Others 961 views 3 replies
on october 1 2018 Rs 50000 insurance premium paid so while preparing financials for 2018-19 rs.25000 booked as prepaid expense now in 2019-2020 any entry is to be passed for that Rs25000.
Replies (3)

You have show  oping  Debit  balance  as prepaid  Insurance account as  on 1/4/2020  , then  if  25000/-  prepaid  for  3 months ( April , May . June )   then  in each month  you pass  entry as follows 

Insurance  Expense  A/c   Dr 

To Prepaid  insurance  A/c   Cr 

(  prepaid  Insurance  Exp adjusted ) 

As on 01.4.2019 / in FY 2019-20 just pass this entry
Insurance exp. a/c dr. ₹25,000
To Prepaid Insurance A/c Rs. ₹25,000

done...( considering u dont pass monthly segregated expense entry)

Nice to understand both the answers.

First book it like:

Prepaid insurance dr.asset

To Bank a/c asset

then when ever it expires pass the above entries:

Insurance expense dr, income statement

To Prepaid insurance Cr. Asset reduced. 

What does the insurance contracts say about this? Do we have to use purchase account or debit bank directly?


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