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Prepaid expenses
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)
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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