How to record unexpired insurance in a revaluation account
Answers
Prepaid insurance is the portion of an insurance premium that has been paid in advance and has not expired as of the date of the balance sheet. This unexpired cost is reported in the current asset account Prepaid Insurance.
As the amount of prepaid insurance expires, the expired cost is moved from the asset account Prepaid Insurance to the income statement account Insurance Expense. This is usually done at the end of each accounting period through an adjusting entry.
To illustrate prepaid insurance, let's assume that on November 20 a company pays an insurance premium of $2,400 for the six-month period of December 1 through May 31. On November 20, the payment is entered with a debit of $2,400 to Prepaid Insurance and a credit of $2,400 to Cash. As of November 30 none of the $2,400 has expired and the entire $2,400 will be reported as Prepaid Insurance. On December 31, an adjusting entry will debit Insurance Expense for $400 (the amount that expired: 1/6 of $2,400) and will credit Prepaid Insurance for $400. This means that the debit balance in Prepaid Insurance at December 31 will be $2,000 (5 months of insurance that has not yet expired times $400 per month; or 5/6 of the $2,400 insurance premium cost).
Answer:
It can be recorded in this financial statement as an asset.
Explanation:
Revaluation accounts are also called as nominal accounts created for the distribution and transfer of gains and losses resulting from changes in the profit-sharing ratio, partner admissions, retirement, and death, as well as increases and decreases in the book value of assets and liabilities.Gain is credited as a rise in assets and a decrease in liabilities.Due to the loss, an increase in liabilities and a fall in asset value are both debited, but unrecorded assets are credited.Liabilities not yet recorded are debited.Revaluation is the term used to describe the account that is prepared to record changes in the value of assets and liabilities at the time of admission, retirement, death, and changes in the profit-sharing ratio.
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