Accrued Insurance – Ford Online Accounting Manual

Liabilities and Net Worth

ACCRUED INSURANCE	LIABILITY ACCOUNT
	2420

Estimated premiums on insurance for which actual premiums will be determined in the future based on actual payrolls, inventories, etc.

			Jrnl.	Dr.	Cr.

Monthly accrual of Worker’s Compensation Insurance based on payroll			SE
	Employee Benefits			8040
		Accrued Insurance			2420

Payment of amount (gross premium less deposit) due to Worker’s Compensation (assuming actual premium exceeds accrual and deposit) per insurance company audit			CD
	Accrued Insurance			2420
	Employee Benefits			8040
		Cash in Bank—General			1001
		Prepaid Insurance			1510

Costs of Worker’s Compensation Insurance should be estimated, as necessary, based on pertinent factors. Monthly, a pro rata share of the estimated liability should be charged to Account 8040, Employee Benefits, and credited to this account. Differences between the accrual and the actual premium as determined by audit should be adjusted to Account 8040, Employee Benefits.
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.
A subsidiary record, such as Form FMC 61, Prepaid and Accrued Expense Schedule, should support this account and should be used in computing monthly accruals.