Paid Insurance Premium Journal Entry
At the end of december the company will record this into their journal book using the below journal entry.
Paid insurance premium journal entry. Insurance premium a c dr to bank a c. Recording journal entries for insurance premiums are also similar. If you are paying cash you are again increasing one asset account at the expense of the other because both cash and prepaid insurance are assets. 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.
Tel me what is the entry for this transaction 1 i deposited rs 10 000 t w. 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. When the asset is charged to expense the journal entry is to debit the insurance expense account and credit the prepaid insurance account. Bank a c personal a c where banker as payer he gives money to the insurance company therefore its credited journal entry.
Bank for payments to an insurance company for business insurance. When you paid later passed this entry. Prepaid insurance journal entries. Example journal entry for prepaid insurance.
Journal entry for the life insurance paid will be. Some insurance payments can go on to the profit and loss report and some must go on the balance sheet. The journal entry would increase supplies and decrease cash. 1000 explanation actually accounting treat accrued as liability which will be payable in future.
Sy 1000 insurance payable accrued ins. This is accomplished with a debit of 1 000 to insurance expense and a credit of 1 000 to prepaid insurance. Company a paid 10 000 as insurance premium in the month of december the insurance premium belongs to the following calendar year hence it doesn t become due until january of the next year. The company has paid 10 000 of an insurance premium for the whole year at the beginning of quarter one.
Prepaid insurance is usually charged to expense on a straight line basis over the term of the related insurance contract. Not all insurance payments premiums are deductible business expenses. Since you are using cash your cash will fall and. Prepaid insurance journal entry.
Insurance premium a c nominal a c its the expense of the company therefore its debited. To cash bank a c cr 5000 being life insurance paid from cash bank account drawing account is debited because the insurance premium is paid for a person who is not related to business transaction.
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