USA How to handle accrued insurance PLUS fund for future premium

[VFCTreas]

We are a small flying club and insurance is a significant part of our expenses. We prepay insurance so credit a Current Asset of Prepaid Insurance, and we monthly increase an Expense account of Insurance (Accrued) and decrease the Prepaid Insurance asset.

HOWEVER, since the annual premium payment is significant, we also want to have a monthly budget contribution to a savings fund so we have enough socked away to have the cash to pay the premium when due. To do this it seems we should have an Asset of Insurance Fund and a monthly Expense of Future-Insurance-Savings, or something like that.

HOWEVER, to do both seems like we will then be double-counting the Expense because each month we will have the NON-cash expense of Insurance (Accrued) PLUS the cash Expense of Future-Insurance-Savings. So this all seems wrong because of the double-counting.

What is the right/best way to handle this?

Help will be greatly appreciated.

 

[bklynboy]

If I read this right, you want to set aside cash to pay the premium when due. There is no accounting here outside of separating your cash so that it has the amounts needed to pay the insurance. There is no expense when you do this - the expense happens as you incur the insurance coverage. Should be as easy as setting up a new bank account and moving the money for payment there so that its not used for other expenses to run the business.

 

[VFCTreas]

If I read this right, you want to set aside cash to pay the premium when due. There is no accounting here outside of separating your cash so that it has the amounts needed to pay the insurance. There is no expense when you do this - the expense happens as you incur the insurance coverage. Should be as easy as setting up a new bank account and moving the money for payment there so that its not used for other expenses to run the business.

Bklynboy -- Got it. Many thanks.