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Prepaid expense

Ajay (Job) (118 Points)

30 March 2010

Hi,

If A ltd co. purchase insurance policy (vehicle) on 13th may'09 for rs. 17000 for one year then wht is the accounting treatment for this.

Thanks in advance.

Regards,

Ajay

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12 Replies

SACHIN KUMAR GARG (Final Student) (105 Points)
Replied 30 March 2010

When policy taken

Insurance on Vehicle Dr

To Bank/Cash

and at the end of the year

P&L A/c Dr.

Prepaid Insurance A/c Dr

To Insurance on Vehicle

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CA KHAN AURANGZAIB (ERP FINANCIAL CONSULTANT) (85 Points)
Replied 30 March 2010

As per your question your company paid R s 17000/- on 13 amy 2009.

Therefore entry wiil be :-

insurence account DR. 17000

To Bank /cash 17000

At the year end :-

Profit and loss DR. 14997.26

Prepaid insurence DR. 2002.74

to Insurence on vehicle 17000

1 Like

Suresh (CA Final Student) (177 Points)
Replied 30 March 2010

Agreee with both of the above..

Nomula Sreenivasarao (DGM -Accounts) (163 Points)
Replied 30 March 2010

Agree with Khan..

Sushil (CA Final Student) (2571 Points)
Replied 30 March 2010

Agree with CA Khan.

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Ajay (Job) (118 Points)
Replied 30 March 2010

Dear All,

Thanks a lot.

Can i do the consolidate entry like as given below,

Insurance a/c -dr 14997.26

Prepaid ins a/c-dr 2002.74

To bank/cash a/c 17000

Plz advice.

Thanks & Regards

CA Ankur Dhamanaskar (Student) (295 Points)
Replied 30 March 2010

Agreed with CA Khan.......!!!

CA Devender Chauhan (Group Financial Accountant) (1526 Points)
Replied 30 March 2010

Originally posted by : CA KHAN AURANGZAIB
	As per your question your company paid R s 17000/- on 13 amy 2009. Therefore entry wiil be :- insurence account DR. 17000 To Bank /cash 17000 At the year end :- Profit and loss DR. 14997.26 Prepaid insurence DR. 2002.74 to Insurence on vehicle 17000