Paid Insurance Premium Journal Entry
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.
Paid insurance premium journal entry. Dealer ship deposit 2 the goodwill amount 1 lakh brought by raju was appoprtioned and paid to the existing parteners eswar mahesh ravi as per their sharing ratios 38 24 38. Sy 1000 insurance payable accrued ins. The journal entry would increase supplies and decrease cash. Not all insurance payments premiums are deductible business expenses.
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. Prepaid insurance journal entries. Bank a c personal a c where banker as payer he gives money to the insurance company therefore its credited journal entry. Any amount withdrawn from business for personal use is treated as drawing.
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. Prepaid insurance is usually charged to expense on a straight line basis over the term of the related insurance contract. Insurance premium a c dr to bank a c. When you paid later passed this entry.
Since you are using cash your cash will fall and. Journal entry for the life insurance paid will be. Recording journal entries for insurance premiums are also similar. Bank for payments to an insurance company for business insurance.
This is accomplished with a debit of 1 000 to insurance expense and a credit of 1 000 to prepaid insurance. When the asset is charged to expense the journal entry is to debit the insurance expense account and credit the prepaid insurance account. Example journal entry for prepaid insurance. Tel me what is the entry for this transaction 1 i deposited rs 10 000 t w.
Prepaid insurance journal entry. 1000 explanation actually accounting treat accrued as liability which will be payable in future. Insurance premium a c nominal a c its the expense of the company therefore its debited. At the end of december the company will record this into their journal book using the below journal entry.
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. 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.
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