Question

Paid by cheque 8400 as insurance premium for a period of 12 months starting 1 aug 2018. Financial year closes on 31 march every year in journal

Answer 1

Answer...

Paid insurance a/c Dr 2800

To bank a/c cr 2800

(being insurance paid)

Explanation:

Answer 2

A journal entry is a business transaction record in the business accounting books.

• The correct journal entry will be -

Fire  Insurance Premium A/c 5600

Prepaid Fire Insurance Premium A/c 2800

To Bank A/c 8400

(Being Insurance premium paid for 12 months starting August)

Working Notes:

Premium of fire insurance = 8400 x 8/12 ( Starting from August)

= 5600

Prepaid premium = 8400 - 5600

= 2800