post the invoice to debit account 1320 - prepaid expenses (asset)
monthly per the amount on the bank stmt, use a journal entry
db insurance
cr prepaid expenses

If you don't want to record the cost of financing separately, you could just record nothing when setting up the contract, and record the 12 payments as invoices in the months to which they apply, using a recurring transaction.

You should also check to find the real cost of financing the insurance, rather than paying a lump sum. If the company has mainly long term debt, it might be higher than the next highest interest rate loan. (2x Prime or more)

Thank you for the reply and recording 12 separate transactions is exactly what we have had to do. What we were really trying to accomplish was to have the insurance debt shown as an Accounts Payable which would then be reduced in 12 transactions. However there seems to be no way to do that without having the entire amount allocated to the insurance account in the month it is posted,

Legionnaire,

Roger and Randy gave you two different methods of making your situation work, so I am not sure why you think you don't have a solution.

Roger suggested, posting the original annual invoice to prepaid expenses asset account (Dr). This sets up the Accounts Payable amount on the books as owing (Cr). Each month, you enter the payment that reduces that amount owing (Dr Accounts Payable) and takes the money from the bank (Cr Bank). Each month you post the general journal entry to move the expense from the asset account (Cr) to the expense account (Dr).

Randy suggested posting 12 invoice directly to the insurance expense account. That will set up each month, the expense (Dr) and the payment to be made or paid (Cr Accounts Payable or Bank).

Solution 1 works great:
the amount you enter is NOT hitting your Insurance Account right away but it goes in your Prepaid account so every month, when you do your bank rec, you would make a transfer FROM your prepaid account TO your Insurance Account.
If you need to keep track of the decreasing amount, i would suggest to create a Prepaid account just for your insurance. Any other prepaid transactions for anything else could be in a separate prepaid account.

Solution 2 is what I always do... I make 12 copies of the Invoice and i write the MONTH it will be paid beside the Invoice number, (23456-Jan, 23456-Feb etc) when I do the bank rec, I then file the one for that month (this way I can compare the amounts and ensure they do not take more etc.) but this way you will not see your prepaid amount decrease like you mentioned.