health insurance

[osama saed]

im working in governmental agency . my insurance policy covers 1/6/2018 - 31/5/2019. lets say by 120K . payments terms are: the 70k covers the months of 2018 shall be paid cash at 1/6/2018. and the remaining 5 months of 2019 shall be paid at the end of the period at 31/5/2019.

what shall be my entry for 1/6/2018 ? shall i post the full 120k in 2018 and in what accounts ??
or as external auditor said in 2018 i shall only post 70k and the remaining 50k is off balance sheet accounts shall not be shown in my balance sheet as of 31/12/2018.

help please

 

[bklynboy]

If I read this right you pay the 70K in June 2018 and 50K in May 2019. 70K gets set up as a prepaid asset day 1. You recognize 10K a month in insurance expense each month (120K/12) and offset the prepaid asset. Once you hit the 70K and have no more prepaid asset, the 10K each month expense goes against a liability. At end of May the liability is reversed when you make the final 50K payment.

Auditor is correct. So at end of 2018 you have 701K insurance expense and 70K reduction in cash. For each month in 2019 you would have 10K expense and 10K liability until you make the final payment.