Question

In: Accounting

How would you debit and credit this (journalize this)? 31/03/16 The insurance payment on 10/03/16 (cost...

How would you debit and credit this (journalize this)?

31/03/16 The insurance payment on 10/03/16 (cost $690) was for 3 months (March, April and May)

31/03/16 Wages for 3 weeks are owing to staff $650

Expert Solution

In general, December is Financial year ending.

Here specially asked for the date 31/3/16.

So, I assued it is as Financial year ending.

For insurance purpose insurance payment on 10/3/16 but specially said that insurance for march, april and May only.

1/3 of amount paid is pertaining to current month and current financial year. and balance 2/3 is pertaining to next financial year. so 2/3 of amount paid is to be recorded as prepaid insurance and 1/3 is recorded as expense.

on 10/3/16, payment passed as below.

Insurance expenses a/c $ 690

Cash a/c $ 690

( Being insurance premium paid for the month Mar, Apr & May 2016 )

So, Journal entry for the Insurance premium is recorded as below on 31/3/2016

prepaid insurance a/c $ 460

Insurance expenses a/c $ 460

( Being insurance premium paid in advance )

As staff wages for 3 weeks are owing. so, for the owing amount journal entry to be recorded on 31/3/16 as below.

Staff wages a/c $ 650

Outstanding staff wages a/c $ 650

( Being Staff wages for 3 weeks are not yet paid )

ekkarill92 answered 2 years ago

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