Prepaid insurance is the portion of an insurance premium that has been paid in advance and has not expired as of the date of a company’s balance sheet. This unexpired cost is reported in the current asset account Prepaid Insurance. As the amount of prepaid insurance expires, the expired por...
Once expenses are incurred, the prepaid asset account is reduced and an entry is made to the expense account on the income statement. Insurance and rent payments are common prepaid expenses. What Are Prepaid Expenses? Prepaid expenses are payments made for goods and services that a company intend...
What type of account is Prepaid Insurance? a. asset b. liability c. equity Accounts The financial activities of an organization are classified into different accounts. In order for the company to have an organize and accurate financial statements, they are named and categorized based ...
rent or insurance, is gradually reduced to zero. The expense moves to the profit and loss statement during the accounting period when the company uses up the accrual. Are Prepaid Expenses a Credit or Debit? This topic can be confusing, so if you’re still wondering, “What is a prepaid...
insurance asset account, decreasing its value. Then you would enter a debit to the insurance expense account, increasing the value of the expenses. This reflects the depletion of the asset by the amount of one month's insurance, and it correctly enters the expense on the income statement. ...
答案解析: Answer (D) is correct . Prepaid expenses, such as supplies, prepaid rent, and prepaid insurance, are reported on the balance sheet at cost minus the expired or used portion. These are typically current assets.Answer (A) is incorrect because The cost must be reduced by the ...
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved prepaid expense An expenditure for an item that will provide future benefits. For example, a firm may pay an insurance premium only once a year, resulting in an expense that provides benefits throughout a 12-month period....
A common prepaid expense is the six-month insurance premium that is paid in advance for insurance coverage on a company’s vehicles. The amount paid is often recorded in the current asset account Prepaid Insurance. If the company issues monthly financial statements, its income statement will repor...
What is the accounting entry for amortization of prepaid insurance? During the accounting close, adjusting accounting entries reduce the prepaid expense via a credit on the balance sheet and increase the appropriate general ledger expense account with an equal debit on the income statement. The adjust...
The adjusting journal entry is done each month, and at the end of the year, when the insurance policy has no future economic benefits, the prepaid insurance balance would be 0. Effect of Prepaid Expenses on Financial Statements The initial journal entry for a prepaid expense does not affect ...