When making adjustments for prepaid insurance at the end of a fiscal year, if you have $16,000 before adjustments, and an unexpired amount of $6,000-is this adjusted as $10,000 credit to Prepaid Insurance and $10,000 debit to Insurance Expense?
USA Adjustments for prepaid insurance
- Thread starter jmafte
- Start date
Yup! Think of it this way - the G/L balance SHOULD reflect reality. The G/L says you have $16K in insurance left. Reality is checked and says you have only $6K. So make the G/L match reality by reducing G/L prepaid acct by $10K Credit- now you have a $10K offsetting debit to handle and that goes to the expense account related to the asset, which is Insurance Expense.
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Thank you very much. I'm taking an all online class for accounting and unfortunately the instructor is poor at best so a lot of this I'm kind of learning on my own via the book. I have a lot of review questions for the final, so I may be posting a few other threads between now and later tomorrow night to make sure I've got this down right.