Prepaid Insurance Debit Or Credit Normal Balance. So, you need to record the amount as a prepaid expense. The type of account and normal balance of prepaid insurance would be.
This means that the debit balance in prepaid insurance at december 31 will be $2,000 (5/6 of the $2,400 cost), since this is the amount that has not yet expired. Does prepaid insurance carry a credit or. Interest payable uses credit for decrease of normal balance.
But before directly diving into the question, let me help you interpret the meaning of prepaid insurance, as this will help you understand the nature of this accounting term. This is due to, under the accrual basis of accounting, the expense should only be recorded when it occurs. Identify whether a debit or credit results in the indicated change for each of the following accounts.
The company should not record the advance payment as the insurance expense immediately. So, you need to record the amount as a prepaid expense. The initial journal entry for a prepaid expense does not affect a company’s financial statements.
What type of account is prepaid insurance? Prepaid insurance is debited, which indicates the creation of an asset in the balance sheet. Another item commonly found in the prepaid expenses account is prepaid rent.
Expenses such as prepaid rent, insurance, etc. The ending balance, either debit or credit, would be classified as prepaid or accrued insurance, at the end of the period. First, debit the prepaid expense account to show an increase in assets.
Revenue is normally a credit balance so a contra revenue account such as sales returns is normally a debit balance; An asset is normally a debit balance so a contra asset account such as accumulated depreciation is normally a credit balance; But it is a liability to the insurance coy which means is a credit balance to d insurance coy because the cash received for the insurance policy have to be provided back to u in future in case of any risk u suffered.
