Prepaid Insurance Expense Journal Entry. The adjusting entry if the asset method was used is: This is primarily because of the fact that business are supposed to follow accrual basis of accounting.
According to the three types of accounts in accounting “prepaid expense” is a personal account. This journal entry credits the prepaid asset account on the balance sheet, such as prepaid insurance, and debits an expense account on the income statement, such as insurance expense. In each successive month for the next twelve months, there should be a journal entry that debits the insurance expense account and credits the prepaid expenses (asset) account.