Insurance Expense Journal Entry

On december 31 2018 company y ltd paid the salaries for january 2019 amounting to 10 000 in advance to the employees of the company.

Insurance expense journal entry. There are a number of journal entries that are important and one of those accounting journal entries is recording the financing of insurance premiums. Insurance expense refers to the expired premium paid by a business to an insurer. Insurance is a. And then you just do the usual entry to record the final payment by the insurance company.

In each successive month for the next twelve months there should be a journal entry that debits the insurance expense account and credits the prepaid expenses asset account. The perks of such expenses are yet to be utilised in a future period. An insurer or insurance company undertakes specific risks thereby protecting the business from possible losses. According to the three types of accounts in accounting prepaid expense is a.

Note that the ending balance in the asset prepaid insurance is now 600 the correct amount of insurance that has been paid in advance. The insurance that is used for december will be reported as an insurance expense on december s income statement. All other amounts should be charged to insurance expense. Let s say xyz company who needs to pay its employee liability insurance for the whole of a fiscal year ending 31 december 2018 amounted 10 000.

This same adjusting entry will be prepared at the end of each of the next 11. This is accomplished with a debit of 1 000 to insurance expense and a credit of 1 000 to prepaid insurance. The above journal entry means the loss due to the fire is cancelled out and the insurance claim is 10 000 more now a full 60 000. Journal entry for prepaid expenses prepaid expenses are those expenses which are paid in advance for a benefit yet to be received.

Below is the journal entry for prepaid expenses. Bank for payments to an insurance company for business insurance. On december 31 the company writes an adjusting entry to record the insurance expense that was used up expired and to reduce the amount that remains prepaid. Knowing the basic journal entries in the generally accepted accounting principles system will make anyone s life easier but especially managers.

Prepaid insurance journal entries. Definition classification and presentation journal entries and examples. Not all insurance payments premiums are deductible business expenses. The income statement account insurance expense has been increased by the 900 adjusting entry.

A basic insurance journal entry is debit. The initial entry is a debit of 12 000 to the prepaid insurance asset account and a credit of 12 000 to the cash asset account. Learn everything you need to know about insurance expense. The adjusting journal entry for prepaid insurance is.