Let’s assume your business purchases insurance for 8 months for $800. To create the journal entry for this transaction, first, you have todebit the Prepaid Insuranceaccount for $800. Why? Because prepaid insurance is an asset account, and as we mentioned, assets are increased by debits. Th...
What type of accounts normally have debit balances and credit balances? What are the two primary interrelationships between the balance sheet and the income statement? What type of account is prepaid expense? What accounts do not affect the balance sheet or income statement?
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When a business collects revenue, how is the accounting equation affected? Where is the offsetting entry made when the revenue account is zeroed out? What would be the total revenue at the break-even point? What kind of accounts are prepaid expenses and unearned revenues?
At each time that a portion of the expense is allocated, then it’s also deducted from the total cost that was first denoted in the asset account. Again, the purpose of these prepaid expenses is so that the company’s financial statements are accurately reflected when the cost of the ...
Link to Sources https://www.investopedia.com/terms/p/prepaidexpense.asp See our Editorial ProcessShare Feedback Editors' Picks Related Articles Discussion Comments Byanon310480— On Dec 23, 2012 What if a prepaid insurance is overcast when recording from the trial balance, let's say maybe by ...
(An exception is the costs of issuing long-term bonds. This amount is reported on the balance sheet as a contra liability account along with Bonds Payable in the long-term liability section.) Related Questions Why would Prepaid Insurance have a credit balance? How do you record a payment ...
Thus, Bill would record a $600 prepaid expense when he makes his six-month premium payment by debiting the prepaid insurance account and crediting the cash account for $600. At the end of each month, Bill would expense the prepaid insurance by debiting insurance expense and crediting prepaid...
If an account is never collected, it is entered as abad debt expenseand not included in the Current Assets account. It is also possible that some receivables are not expected to be collected on. This consideration is reflected in theAllowance for Doubtful Accounts, a sub-account whose value ...
Type of card (debit or credit) Payment method (such as a chip-equipped, PIN-enabled, or tap-and-pay card) Type of transaction (online or in person) Merchant’s industry Credit Card Interchange Fees The world’s two biggest payment networks, Mastercard and Visa, account for the majority of...