On December 31, the company writes an adjusting entry to record the insurance expense that was used up (expired) and to reduce the amount that remains prepaid. Learn everything you need to know about insurance expense: definition, classification and presentation, journal entries, and examples. Suppose you buy $1,500 in errors and omissions insurance that is good for the next 12 months. Receive the cash from the insurance company. (f) Goods loss by theft Rs 5,000. Dr. Prepaid Insurance (A) XXX (for unexpired policy) Dr. Accounts Payable (L) XXX (for the entire balance to make it zero) Cr. Company Pays Premium Into Insurance Contract Life Insurance Premium Expense $100,000 Cash $100,000 2. Insurance expense refers to the expired premium paid by a business to an insurer. Accounts Payable (1,000) July-2017 Dr. Accounts Payable 1,000 July-2017 Cr. Cash (A) XXX (for the cash paid) After the payment, you make the following journal entry at the end of each period: Dr. Insurance Expense (P/L) XXX Cr. Accounting for the Life Insurance Expense FASB Technical Bulletin 85-4 (Also See EITF 06-5) Life Insurance Entries (based on Executive Variable Universal Life Sample Model) Balance Sheet Income Statement DR CR DR CR 1. In addition to the gross pay and withholding in the previous payroll journal entries, ABC Company has incurred additional payroll liability expenses that must be recorded. The entry is to debit Insurance Receivable and credit Direct Premium Income The Company has received the outstanding premiums receivable of $24,000,000. The process is split into three stages as follows: Write off the damaged inventory to the impairment of inventory account. Prepaid Insurance: Adjusting the Entry. (c) Goods loss by fire Rs 40,000 insurance company does not accepted any claim. Are these the correct journal entries that we need to make? Prepaid Insurance (A) XXX (for unexpired policy) This is accomplished with a debit of $1,000 to Insurance Expense and a credit of $1,000 to Prepaid Insurance. Dental Insurance Ex. The journal entries below act as a quick reference for accounting for insurance proceeds. (e) Goods loss by fire Rs 60,000 insurance company accepted only 60% claim. When the claim is agreed, set up an accounts receivable due from the insurance company. The journal entry is completed this way to reverse the accrued revenue, while revenue entry remains the same, since the revenue needs to be recognized in January, the month that it … (1,000) When the health insurance bills arrive, we will book the expenses based on the invoices. When you make a prepaid rent or unexpired insurance journal entry, you report the money as an asset, entering it in a prepaid insurance account in the books. (d) Goods loss by fire Rs 50,000 and insurance company accepted full claim. 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