In cash basis accounting, how would i record a 17000 insurance payment that is for an 18 month policy?
1) categorize the full amount from bank feeds when it's posted. Since its cash based accounting method you can recognize the amount when it's paid
2) the company would debit prepaid insurance and credit cash. The following month the firm recognizes one month of insurance expense. The journal emtry is to debit (increase) insurance expense and credit prepaid insurance. Ypu would do that for all following month
3) prepaid insurance premiums are deductable when paid as lonmg as they don't apply to period extending more than 12 months after the end of the taxable year when the payment were made. if the insurance contract runs for a longer period, general rule applies and you need to take the deduction over time
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