BAM 110 Unit 2 Essay
BAM 110 Unit 2 Essay
Question # 1. On January 1 the Prepaid Insurance account had a balance of $6,000 that represented 6 months’ worth of advance payment. It is now the end of March and there have been no adjustments to the account balance. Determine the amount of expense to record at the end of March.
An account for “Prepaid Insurance” had a balance of $6,000.00. This was six months of advance payments into this account as of the 1st of January. It is now the 31st of March and there have been now changes to Prepaid Insurance account. I will discuss the amount of expenses to record up till the last day of March.
The prepaid expenses show all payments made for expenses which have not yet been charged. Expenses are recognized when they are charged regardless of the time frame when they are paid or show as paid. Prepayments are not billed yet or charged so they will not be recorded as an expense. Prepayments will show as an asset.
Prepaid expenses need to be adjusted at the end of an accounting period. Accounting periods are usually completed at a quarterly rate, but companies can determine their own accounting times. Most insurance premiums are paid prior to the period covered by the payment, it is common to debit Prepaid Insurance and credit Cash for the amount paid. As the prepaid amount is withdrawn or charged it will cause the balance in the prepaid account to be reduced.
As of the 1st of January the “Prepaid Insurance” account had a debit of $6,000.00 and a credit of $6,000.00.
As of the 31st of March the “Prepaid Insurance” account would have a debit of $3,000.00 and a credit of $3,000.00. This is because the monthly adjustment to the account would be $1,000.00 and after three month the account would have to have $3,000.00 in payments from the prepaid account.
Total monies left in the account would be $3,000.00. This would allow for three additional months of payments for the insurance benefits. This would cover a total of six months
Question # 1. On January 1 the Prepaid Insurance account had a balance of $6,000 that represented 6 months’ worth of advance payment. It is now the end of March and there have been no adjustments to the account balance. Determine the amount of expense to record at the end of March.
An account for “Prepaid Insurance” had a balance of $6,000.00. This was six months of advance payments into this account as of the 1st of January. It is now the 31st of March and there have been now changes to Prepaid Insurance account. I will discuss the amount of expenses to record up till the last day of March.
The prepaid expenses show all payments made for expenses which have not yet been charged. Expenses are recognized when they are charged regardless of the time frame when they are paid or show as paid. Prepayments are not billed yet or charged so they will not be recorded as an expense. Prepayments will show as an asset.
Prepaid expenses need to be adjusted at the end of an accounting period. Accounting periods are usually completed at a quarterly rate, but companies can determine their own accounting times. Most insurance premiums are paid prior to the period covered by the payment, it is common to debit Prepaid Insurance and credit Cash for the amount paid. As the prepaid amount is withdrawn or charged it will cause the balance in the prepaid account to be reduced.
As of the 1st of January the “Prepaid Insurance” account had a debit of $6,000.00 and a credit of $6,000.00.
As of the 31st of March the “Prepaid Insurance” account would have a debit of $3,000.00 and a credit of $3,000.00. This is because the monthly adjustment to the account would be $1,000.00 and after three month the account would have to have $3,000.00 in payments from the prepaid account.
Total monies left in the account would be $3,000.00. This would allow for three additional months of payments for the insurance benefits. This would cover a total of six months