Prepaid Insurance Journal Entry

Prepaid Insurance Journal Entry

Prepaid Insurance is an asset (because benefit is to be consumed in future). Thus prepaid Insurance is debited in the books of account as an asset and cash is credited upon payment of prepaid insurance. The Journal entry of prepaid insurance is given below

Date	Particulars	Dr.	Cr.
	Prepaid Insurance	$ xxx
	Cash		$ xxx

 

Prepaid Insurance Journal Entry Example

In December 2014 Insurance for next financial Year is paid of $ 80,000. The payment of Insurance for next year will be recorded as under.

Date	Particulars	Dr.	Cr.
2014	Prepaid Insurance	$ 80,000
2014	Cash		$ 80,000

 Prepaid Insurance Charged Expense

Prepaid expenses recognized as asset in previous year shall be charged as expense in the current year. Thus asset appearing in the books shall be removed or charged to expense in the current Insurance year. This has been shown below

Date	Particulars	Dr.	Cr.
2014	Insurance	$ 50,000
2014	Prepaid Insurance.		$ 50,000