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Reply With Quotewhat ever has expired of the insurance goes into the insurance expense account as a debit and the same amount is credited from the pre-paid insurance account(asset account).
your numbers are not adding up right.
Quick question on something that has been plaguing me.
How would you record insurance expired during the year in a adjusting Entry.
Also
Say a u have a balance of 4750 at the beginning of a year, then debited 2150. How would u get the appropriate entry at year end based on the following situations. The insurance expired is 2250 and the ending balance in pre-paid account was 2500.
Appreciate if anyone could help me out.
what ever has expired of the insurance goes into the insurance expense account as a debit and the same amount is credited from the pre-paid insurance account(asset account).
your numbers are not adding up right.
redwhere is right. If Beg. Bal. of the prepaid insurance account is 4750, and by the end of the period, 2250 of it has been used, you would credit the prepaid insurance for 2250, and the corresponding debit would be to the insurance expense account, closed to retained earnings. If the company paid 2150 for future insurance during the period, you'd just debit the prepaid insurance account for 2150, with the corresponding credit to cash or whatever was used to pay for it.
If this is the case, the ending balance in the prepaid account should be 4750-2250+2150 = 4650.
If you actually meant to type "2250" when you typed "2150", and "credited" where you typed "debited", and didn't mean that more prepaid insurance was bought during the period, then you are right, ending balance is 2500. I think you made these two typos, because otherwise, your ending balance makes no sense. I think you need to just read the text or lecture notes to get the terminology down better so you can phrase your questions more clearly, but hopefully you got the gist of it from redwhere's answer and mine.
Adjusting Journal Entry:
DR Insurance Expense 2250
CR Prepaid Insurance 2250
and then,
DR Retained Earnings 2250
CR Insurance Expense 2250
to close the expense account into R/E. Probably not important for the problem, though.
Simple as that! Hope that helps.
That was actually word for word of the actual problem. I was having problems because the numbers were not adding up. Thanks for the help, I know the 1st part I got right not sure about the rest. Almost same exact problem came up on a test I had today.
If you can, post the procedure that comes to that sum. I'm interested in how that final sum comes about.
Just out of curiosity, since I missed this thread by miles: Are you heading towards an accounting certification in the future? Which one are you thinking of?
Maybe that will bring more accountants in here to discsuss their choices. Personally I'm applying into the CMA stream program - hopefully - next fall if I am able to get a few extra credits this summer which would allow me to get my B.BA already after just 3 years. I just finished an interview with my school's CMA rep earlier today about some of the future choices I could make to get into the accelerated program, what a day in the life is like, where I can network, etc... If any certification is in your future - see if your school has a representative and try and schedule an appointment, they really help focus you towards just that.
Personally, I'm currently pursuing a Master of Management Studies (have a B.S.E. Biomedical Engineering, B.S. Economics), so accounting is just one of those fields that I take a few courses in as well as many other things. I can't contribute much to the discussion you want. Sorry!
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