Why would prepaid insurance have a credit balance?
Several situations could cause a credit balance in the asset account Prepaid Insurance. If one of the $600 payments is debited to Insurance Expense (or another account) instead of Prepaid Insurance, the monthly adjusting entries will cause the balance in the Prepaid Insurance account to become a credit balance.
What is the normal balance of prepaid insurance?
Acct1: Classifying Accounts and Normal Balance Sides
| A | B |
|---|---|
| The normal balance side of SUPPLIES | Debit |
| The normal balance side of PREPAID INSURANCE | Debit |
| The normal balance side of ACCOUNTS RECEIVABLE–SAM ERICKSON | Debit |
| The normal balance side of ACCOUNTS PAYABLE–STAPLES | Credit |
Is prepaid insurance a debit or credit in trial balance?
Prepaid insurance is usually charged to expense on a straight-line basis over the term of the related insurance contract. When the asset is charged to expense, the journal entry is to debit the insurance expense account and credit the prepaid insurance account.
Is prepaid insurance a liability or asset?
current asset
Prepaid insurance is usually considered a current asset, as it becomes converted to cash or used within a fairly short time.
What type of account is a prepaid insurance?
Prepaid insurance is considered a business asset, and is listed as an asset account on the left side of the balance sheet. The payment of the insurance expense is similar to money in the bank, and the money will be withdrawn from the account as the insurance is “used up” each month or each accounting period.
Is Deferred revenue a debit or credit?
As the recipient earns revenue over time, it reduces the balance in the deferred revenue account (with a debit) and increases the balance in the revenue account (with a credit). The deferred revenue account is normally classified as a current liability on the balance sheet.
Is prepaid insurance a temporary account?
Up balances between accounting periods amount that has been paid but has not yet expired as of the period! As a temporary or nominal account accounts to prevent mixing up is prepaid insurance a temporary account between accounting periods amount that has been in.
