Insurance Expense Journal Entry Example. A manufacturer will report on its income statement the insurance expense incurred. You pay upfront and use the insurance throughout the year.
Prepaid expenses include the following: The insurance payment was $1,392 for the whole year. A liability is recorded because the company still owes the expense.
So now it’s time for the debits and credits. It hasn’t paid for it yet. How to record a prepaid expense:
Let us assume on january 25, abc ltd pays for its annual building and contents insurance. The company only incurred the. This will bring down the balance of the prepaid insurance account and increase your insurance expense.
You pay upfront and use the insurance throughout the year. The interest is charged at 1% per month. A manufacturer will report on its income statement the insurance expense incurred.
Journal entry for accrued expenses. For example, on december 18, 2020, the company abc make an advance payment of $6,000 for the fire insurance that it purchase to cover the whole year of 2021. The journal entry for this will include:
The adjusting entry for prepaid expenses includes: This costs them $6,500 this year. For example, if the company losses an asset that has the value of $50,000 due to a fire accident but the company only receives 80% of its value which is $40,000 from the insurance.
