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What is insurance expense in debit and prepaid insurance in credit ? the answer is 5320 is not right,help!!?

By: franky lee

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1. jss_obrien - November 28, 2009

well how much is the insurance expense????
when expenses increase its a debit and when it decreases its a credit. HOWEVER, prepaid insurance is held as an asset until it is used. so for the prepaid it would be held under assets and it would be a debit, since it INCREASES the assets, but once you use some of the insurance, as the months pass, you have to credit the assets and debit the expenses,.
hence debits will always equal credits so you must have a debit and a equal credit in every transactions. hope this answers your question

2. dragonsmercy - November 30, 2009

Insurance expense, being an expense account, would be on the debit side.

Prepaid insurance is considered an asset, and should also be a debit.

When you’ve used a portion of your prepaid insurance (ie. a month), you write the portion off to the expense account.

For example:

You buy insurance for 1 year for $600

Jan 1
Prepaid Insurance DR $600
Cash CR $600
To record purchase of 1 year’s insurance

Jan 31
Prepaid Insurance DR $50
Insurance Expense CR $50
To record one month used insurance.

As for the 5320 not being right, I would have to see the entire list of transactions to see where it went wrong, but I hope that helped.