Assets & expenses for accrual accounting?
I am totally confused on this is here someone that can oblige me and front me surrounded by the right direction so that I take to mean this rather more.
On March 1, 2003, a company rewarded a $16,200 premium on a 36-month insurance policy for coverage
formation on that date. Refer to that policy and spread contained by the blanks within the following table:
Balance Sheet Insurance Asset Using
Accrual Basis Cash basis
Dec, 31, 2003
Dec 31, 2004
Dec 31, 2005 $5400.00 $0.00
Dec 31, 2006
Insurance expense using
2003 $ $
2004 $ $
2005 $900.00 $0.00
2006 $ $
Answers:
Actually, in adjust entry contained by accounting, remarkably surrounded by accrual, adjectives are using the asset method and the expense method.
In the asset method, the oringinal entry is Debit: Prepaid Expense and Credit: Cash while in the expense method, the resourceful entry is Debit: Insurance Expense and Credit: Cash.
From your entry above, using dosh principle, the 5,400 $ refer to the amount explicitly already used by the business ( or the expired portion of the compensated premium) while if your using expense idea, the 900.00$ refer to the unused amount that be already rewarded by the business.
i am assuming that the 16200 is for the adjectives 3 years. The insurance would be 450 respectively month. contained by demonstration you would put the unbroken article on accounts as an asset (prepaid insurance). at that time you would not own an expense. respectively month you will filch 450 stale the asset and it to the expense so at the closing of 2003 the asset would be 11700 and the expense would be 4500, within 2004 the asset would grow less to 6300 and the expense would be 5400, within 2005 the asset would dwindling to 900 and the expense would be 5400 and contained by 2006 the asset would be 0 and the expense would be 900.
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On March 1, 2003, a company rewarded a $16,200 premium on a 36-month insurance policy for coverage
formation on that date. Refer to that policy and spread contained by the blanks within the following table:
Balance Sheet Insurance Asset Using
Accrual Basis Cash basis
Dec, 31, 2003
Dec 31, 2004
Dec 31, 2005 $5400.00 $0.00
Dec 31, 2006
Insurance expense using
2003 $ $
2004 $ $
2005 $900.00 $0.00
2006 $ $
Answers:
Actually, in adjust entry contained by accounting, remarkably surrounded by accrual, adjectives are using the asset method and the expense method.
In the asset method, the oringinal entry is Debit: Prepaid Expense and Credit: Cash while in the expense method, the resourceful entry is Debit: Insurance Expense and Credit: Cash.
From your entry above, using dosh principle, the 5,400 $ refer to the amount explicitly already used by the business ( or the expired portion of the compensated premium) while if your using expense idea, the 900.00$ refer to the unused amount that be already rewarded by the business.
i am assuming that the 16200 is for the adjectives 3 years. The insurance would be 450 respectively month. contained by demonstration you would put the unbroken article on accounts as an asset (prepaid insurance). at that time you would not own an expense. respectively month you will filch 450 stale the asset and it to the expense so at the closing of 2003 the asset would be 11700 and the expense would be 4500, within 2004 the asset would grow less to 6300 and the expense would be 5400, within 2005 the asset would dwindling to 900 and the expense would be 5400 and contained by 2006 the asset would be 0 and the expense would be 900.