A current asset which indicates the cost of the insurance contract (premiums) that have been paid in advance. It represents the amount that has been paid but has not yet expired as of the balance sheet date. A related...
A current asset which indicates the cost of the insurance contract (premiums) that have been paid in advance. It represents the amount that has been paid but has not yet expired as of the balance sheet date. A related...
What is prepaid insurance? Definition of Prepaid Insurance Prepaid insurance is the portion of an insurance premium that has been paid in advance and has not expired as of the date of a company’s balance sheet. This...
Why would Prepaid Insurance have a credit balance? Definition of Prepaid Insurance Generally, Prepaid Insurance is a current asset account that has a debit balance. The debit balance indicates the amount that remains...
coincides with the company’s accounting year. Therefore, the insurance payments will likely involve more than one annual financial statement and many interim financial statements. Prepaid Insurance vs. Insurance...
Why is prepaid insurance a short term asset? Definition of Prepaid Insurance as a Short-term Asset Prepaid insurance is usually a short term or current asset because insurance premiums are rarely billed for periods...
an incorrect amount. Example of Overstated If a company reports that its prepaid insurance is $8,000, but the true or correct amount of prepaid insurance is only $7,000, the accountant will say that the reported amount...
will be reported as an expense. Example of a Cost A company’s property insurance bill for the next six months of insurance shows a cost of $6,000. Initially the cost of $6,000 is reported as the current asset Prepaid...
What are the two methods for recording prepaid expenses? Definition of Prepaid Expenses Prepaid expenses refers to payments made in advance and part of the amount will become an expense in a future accounting period. A...
up within one year are reported on a company’s balance sheet as a current asset. As the amount expires, the current asset is reduced and the amount of the reduction is reported as an expense on the income statement....
will report on its income statement the insurance expense incurred for its selling, general and administrative functions. However, the insurance costs associated with the manufacturing function are included in the cost...
asset Prepaid Insurance. During the month of January, the company should report $100 of insurance expense. At the end of January, the company’s balance sheet should report Prepaid Insurance of $500 (indicating that...
The amount of insurance that was incurred/used up/expired during the period of time appearing in the heading of the income statement. The amount of insurance premiums that have not yet expired should be reported in the...
A payment. The expenditure might be for a significant long term asset (capital expenditure), a short term asset (prepaid insurance), a reduction in a liability, or for an immediate expense such as rent.
A contract to provide coverage or protection in exchange for a payment or “premium.” Examples of insurance protection include liability, property, business interruption, life, disability, etc. The company...
December income statement as Insurance Expense of $400. The remaining $2,000 of unexpired insurance (5 months X $400) must be reported on the December 31 balance sheet as a current asset such as Prepaid Insurance or...
, there will be no prepaid insurance nor will there be a liability for accrued worker comp expense. If the employer remits worker comp premiums to the insurance company in advance of the cost associated with wages and...
Cash and other resources that are expected to turn to cash or to be used up within one year of the balance sheet date. (If a company’s operating cycle is longer than one year, an item is a current asset if it will...
, the company’s asset Cash is decreased and its asset Prepaid Insurance is increased. Each month, one-sixth of the premium is recorded as Insurance Expense and the balance in Prepaid Insurance is reduced. When an...
Our Explanation of Accounting Basics uses a simple story to introduce important accounting concepts and terminology. It illustrates how transactions will be included in a company's financial statements.
account such as Service Revenues. Credit Wrong. 8. What type of accounts are Prepaid Insurance, Prepaid Advertising, and Prepaid Expenses? Asset Right! Prepaid expenses that have not been used up or have not yet expired...
What is the difference between assets and fixed assets? Assets are resources owned by a company as the result of transactions. Examples of assets are cash, accounts receivable, inventory, prepaid insurance, land,...
on December 31 has a prepaid expense if on December 1, it paid $6,000 for insurance coverage from December 1 through May 31. Recording a Prepaid Expense A prepaid expense can be recorded initially as an expense or as a...
. Any worker compensation insurance costs that have been prepaid should be reported as a current asset (such as Prepaid Insurance) on the balance sheet. Any worker compensation premiums that have been incurred, but not...
amount that is actually prepaid (not yet expired) at the end of the quarter. Example of Adjusting Prepaid Expenses Assume that a company’s only prepaid expense is the prepaid premiums on its liability insurance...
$600 per day). The adjusting entry will debit expenses for $4,200 and will credit accrued liabilities for $4,200. 7. Prepaid insurance, prepaid expenses, and unearned revenues involve which type of adjusting entries?...
be debited. Except for special situations (correcting entries, closing entries, and some adjusting entries) expenses are always debited. Prepaid Insurance Debit Right! Prepaid Insurance is an asset and assets are...
such as prepaid insurance, on its December 31 balance sheet. A deferral also occurs with revenues. The insurance company receiving the $12,000 for the six-month insurance premium beginning December 1 should report...
of $20,000 per year ($500,000 divided by 25 years). Another example of a deferred expense is a $12,000 insurance premium paid by a company on December 27 for insurance protection during the upcoming January 1 through...
asset Accounts Receivable will decrease and its asset Notes Receivable will increase. 2) A company prepays its insurance. As a result its asset Cash decreases and its asset Prepaid Insurance increases. 3) A company buys...
should be systematically recognized/reported as an expense on the appropriate income statements. Some examples include the expensing of prepaid insurance premiums and the depreciation of assets used in the...
to the owner’s capital account at the end of each accounting year. Select... True False 3. The closing entries will include a __________ to the Sales account. Select... debit credit 4. Prepaid Insurance is a temporary...
in advance of the accounting period(s) in which it will become an expense. An example is a payment made in December for property insurance covering the next six months of January through June. The amount that is not yet...
will not be depreciated? Select... Buildings Equipment Land Vehicles 10. The amount of prepaid insurance that has not expired as of the end of an accounting period should be reported as __________. Select... an asset an...
. For instance, if the payment was made on December 1 for protection during the upcoming period of December 1 through May 31, the retailer’s December’s income statement should report Insurance Expense of $200 (the...
Our Explanation of Adjusting Entries gives you a process and an understanding of how to make the adjusting entries in order to have an accurate balance sheet and income statement. Eight examples including T-accounts for...
Our Explanation of Adjusting Entries gives you a process and an understanding of how to make the adjusting entries in order to have an accurate balance sheet and income statement. Eight examples including T-accounts for...
accounting __________ principles. 15. The profitability of a company for a specified period of time is reported on the __________ income statement. 16. The main components or elements of the income statement are...
is a contra-asset account. 6. Sales and services that are provided on credit will cause an increase in the asset account __________ __________. 7. Accounts Payable, Wages Payable, and Notes Payable are examples of...
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For the past 52 years, Harold Averkamp (CPA, MBA) has worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.
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