Wonderful Prepaid Insurance In Trial Balance

Prepaid insurance is the part of insurance which is already paid but the time period for use is not expired till the date of balance sheet.

Prepaid insurance in trial balance. This unexpired cost is reported in the current asset account Prepaid Insurance. In other words these are advanced payments by a company for supplies rent utilities and others that are still to be consumed. Prepaid insurance is considered a business asset and is listed as an asset account on the left side of the balance sheet.

Cash 11 Accounts Receivable 5 Supplies 1 Prepaid Insurance 2 Equipment 30 Notes Payable 10 Accounts Payable 12 Owners Capital 20 Owners Drawings 600 Service Revenue 13 Salaries and Wages Expense 2 Travel Expense 1 Rent Expense 1 Miscellaneous Expense 200 55970 55 Other data. Accounts such as prepaid insurance prepaid rent and. Key each transaction to the letter that identifies the transaction.

These balances in post-closing T-accounts are transferred over to either the debit or credit column on the post-closing trial balance. Hence they are classified as company assets. The amounts and accounts involved in the adjusting process during the accounting cycle will depend on each companies unadjusted trial balance.

It is a part of current asset which has not been used. Prepaid insurance is insurance paid in advance and that has not yet expired on the date of the balance sheet Balance Sheet The balance sheet is one of the three fundamental financial statements. Prepaid Insurance is the amount of insurance premium paid by the company in an accounting period that didnt expire in the same accounting period and therefore the unexpired portion of this insurance will be shown as an asset in the balance sheet of the company.

Notice how we start with the unadjusted trial balance in each account and add any debits on the left and any credits on the right. If the prepaid expense is shown inside the adjusted trial balance it indicates that the related adjustment entry has already been posted ie. D Prepaid expenses in the trial balance relate to an amount of 155000 for Printing and 200000 for Insurance.

The balance in the Prepaid Insurance account represents the cost of a two-year insurance policy covering the period from. Balances as of September 1. As prepaid insurance is an asset that will expire through the passage of time the cost of expiration will need to be recognized as an expense during the period.