October 30, 2016 admin

Prepaid Expenses—Insurance

Assets

PREPAID EXPENSES—INSURANCE ASSET ACCOUNT
1510

ACCOUNT EXPLANATION
Insurance paid in advance that applies to future accounting periods.
TRANSACTIONS
  Jrnl. Dr. Cr.
  One-year premium on equipment insurance paid in advance CD
    Prepaid Insurance 1510
      Cash in Bank—General 1001
             
  Monthly write-off of prepaid insurance expense SE
    Insurance—Excluding Building & Employee 8620
      Prepaid Insurance 1510
             
  Deposit on Workmen’s Compensation insurance CD
    Prepaid Insurance 1520
      Cash in Bank—General 1001
             
  Payment of amount (gross premium less deposit) due to Workmen’s Compensation insurance company per audit (assuming earned premium exceeds accrual and deposit) CD
    Accrued Insurance 2420
    Employee Benefits   8040
      Cash in Bank—General     1001
      Prepaid Insurance     1510
COMMENTS
  • A subsidiary record, such as Form FMC 61, Prepaid and Accrued Expense Schedule, should support this account and should be used in computing monthly write-offs to expense.
  • Advance premiums or deposits should be charged to Account 1510, Prepaid Insurance, and should be cleared after the audit by the insurance company when the deposit is applied as a reduction of the amount to be paid to the insurance company.