In: Accounting
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
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 )