Accounting for IGCSE & O level - The Fundamentals Of Accounting (Section 6 - No. 26)
What is the correct journal entry to record an expense for Insurance? (Paid in advance)
Debit Prepaid Insurance, Credit Cash
Debit Insurance Expense, Credit Cash
Debit Cash, Credit Insurance Expense
Debit Insurance Expense, Credit Prepaid Insurance
Explanation
When paying in advance, Debit Prepaid Insurance, Credit Cash is the correct journal entry. Then in the future period, a debit would be made to Insurance Expense, and a credit to Prepaid Insurance
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