![]() The answer to certain tax and accounting issues is often highly dependent on the fact situation presented and your overall financial status. While the concepts discussed herein are intended to help business owners understand general accounting concepts, always speak with a CPA regarding your particular financial situation. Therefore, the information available via this website and courses should not be considered current, complete or exhaustive, nor should you rely on such information for a particular course of conduct for an accounting or tax scenario. Tax and accounting rules and information change regularly. Prepaid Expenses: Definition, Examples & Recording Process. At the end of the year, after adjusting entries were recorded, the balance in the prepaid insurance account Prepaid insurance had a balance of 1000 on the companys balance sheet. During the year, 86,000 was paid for insurance. Insurance is an excellent example of a prepaid expense, as it is customarily paid for in advance. At the beginning of the year, a company had a balance in its prepaid insurance account of 48,400. This unexpired cost is reported in the current asset account Prepaid Insurance. Reliance on any information provided on this site or courses is solely at your own risk. Most prepaid expenses appear on the balance sheet as a current asset unless the expense is not to be incurred until after 12 months, which is rare. Prepaid insurance is the portion of an insurance premium that has been paid in advance and has not expired as of the date of a company’s balance sheet. Accounting practices, tax laws, and regulations vary from jurisdiction to jurisdiction, so speak with a local accounting professional regarding your business. The content is not intended as advice for a specific accounting situation or as a substitute for professional advice from a licensed CPA. ![]() When the insurance coverage comes into effect, it goes from an asset and is charged to the expense side. Insurance companies carry prepaid insurance as current assets on their balance sheets because its not consumed. The content provided on and accompanying courses is intended for educational and informational purposes only to help business owners understand general accounting issues. Prepaid insurance is payments made to insurers in advance for insurance coverage.
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