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LeahB

PrePaid Insurance

SUGGESTED
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Our yearly Insurance for our fiscal year October 1, 2023 to Sept 30, 2024 is a total of $4000.00, that is paid in 3 instalments ($1333.33) on Oct 1, Nov 1, and (1333.34) Dec 3. 

In previous years, our old accountant (now retired) had set up a reoccurring charge in the GJ and posted the payment monthly ($333.33 for 12 months). 

Should I be posting the insurance payment when it was taken from the bank? 

Example:  Credit Prepaid Insurance 1333.33 Debit Insurance Expense 1333.33 on October 1, November 1 and December 1st?

or the way she was as 12 equal payments over the year? 

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    When you pay the instalments you should credit bank and debit Prepaids which will carry the prepaid balance... then each month you enter the insurance expense by debiting Ins Expense and Credit the prepaid balance instead of bank because its already paid.

    Instalments     Dr Prepaid   1333.33

                                        Cr Bank    1333.33

    Monthly           Dr Insurance Exp   333.33

                                        Cr Prepaid      333.33

    That will spread the expense out over the year rather than having it hit each time it is paid. Hope that makes sense!

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