In case of some expense u might have seen advance payment is done. So as to comply with the terms of agreement or it can be
for any other reason too.
And this advance is shown in the asset side of balance sheet.
Now,in case of insurance the same thing is happening.
For example:- a ltd. F.y begins from 1-4-10 to 31-3-11. A ltd. Purchases a fixed asset on 1-2-11. Now a ltd. Wants to get this fixed asset insured and minimum insurance period as per the insurance policy is 1 year. So here the insurance period will
begin from 1-2-11 to 28-2-12.
As per accrual basis of accounting expenses which pretain to a particular year are are to be shown in the p/l of that year. And rest are shown as prepaid expense (in case of insurance termed as , unexpired insurance)
now coming back to a ltd. Let us suppose that payment made is = rs. 12000.
Calculation of expired and unexpired expense.
Total insurance expense paid = 12000
insurance expense of single = 12000/12
expired insurance = 1000*2 (for the month of feb and march 2011)
and rest of the amount is unexpired insurance because the period to which it pertains is of next f.y. Hence in the b/s of 10-11 insurance amount of rs 10000 will be shown as unexpired insurance.
And yes one thing more. There is no such term as unexpired prepaid insurance. Either u call it prepaid insurance or unexpired insurance.
Hope i solved ur query.
Yes. Unexpired insurance, or prepaid insurance, represents value to the business since it has utility and is owned by the business (the company has claim to the policy). Therefore by definition, unexpired insurance is an asset.
those expenses which have been paid in advance and whose benefit will be available in future are called unexpired or prepaid expenses. e.g. insurance premium
debit unexpired rentcredit prepaid rent
debit insurance expense 10000 credit prepaid insurance 10000
Yes you can get insurance on prepaid phones.
Prepaid insurance is reported on the balance sheet as a
insurance not yet paid
[Debit] Prepaid Insurance [Credit] Cash / bank
prepaid insurance a/c..........dr. To insurance a/c
Prepaid Rent, Prepaid Insurance, and Prepaid Interest... maybe? Check it out on Investopedia.com
Apportioning cost means dividing cost between Expired cost (depreciated value) and Unexpired cost (not depreciated yet). Cost which is used or whose time period is over is expired cost which can also be called as expense now, while unexpired cost can be named as remaining book value. For example, Prepaid rent was paid in September for the coming 4 months was $4000. Now, at the end of September the expired cost will be $1000 (and will be recorded in income statement as expense) and Unexpired cost will be $3000 (& will be recorded in Balance sheet as an asset ). Entry at the start of September would bePrepaid Rent a/c $4000 (Dr)Cash a/c $4000 (Cr) Entry at the end of September would be Rent a/c $1000 (Dr)Prepaid Rent a/c $1000 (Cr)See here, the used up cost or you may say asset has been turned into an expense, mitigating the value of Prepaid rent with $1000. Suppose you are preparing Balance Bheet at the end of September, the $1000 will be recorded in Income Statement as an expense while the Remaining $3000 will be recorded as current asset in Balance Sheet.
Prepaid insurance premia is to be shown in the Profit & Loss Account, and not as an asset in the Balance Sheet.
Because a prepaid expense is a type of asset. Once you prepay insurance for example. You have an increase in this asset called "Prepaid Insurance", and thus a reduction in cash. Once the Prepaid Insurance is used up it decreases while the Insurance expense increases. This is called amortization.
freight prepaid by item calculation
i mean it’s probably worth like 125 a day cause if its 120,000.00 for 12 months it should be around 200 mabey even 300 a day
Prepaid insurance is personal nature of account and amount in it is shown as current asset in balance sheet.
Prepaid insurance go to balance sheet as it is paid in advance and current assets of business.
Those expenses which have been paid in advance and whose benefit will be available in future are called unexpired or prepaid expenses. e.g. insurance premium The expenses remaining unpaid at the end of the accounting period are called outstanding expenses.Certainly expenses like salaries,rent etc. of the every month will be paid in the next months. By ADITYA (UPES)
When payment for insurance is made advance of actual expenses then it is called prepaid insurance which is asset for business until insurance benefit is utilized while insurance expense is actual insurance expense when insurance benefit is taken.
yes, it is
Prepaid insurance is that amount which is paid in advance and no benefit has taken yet that's why it is current asset for business.
Prepaid insurance would be an asset. Insurance expense is when the insurance has been used up, thus making it an actual expense on the Income Statement. Whereas Prepaid Insurance on a Balance sheet is classified as an Asset.