On July 1, 2011, Gavin Company purchased a 1 year insurance policy for $3,600.
What adjusting entry would be made each month?Answer:
In the books of Gavin Company
Date Particulars LF Debit ($) Credit($)
01/07/2011 Insurance Premium A/c Dr 3,000
To Cash/Bank A/c 3,000
(Being Insurance Premium paid)
This is a one time entry.
While preparing final accounts then only adjusting entry takes place.
Adjusting Entry depends on your accounting period:
Insurance Premium A/c Dr xxxxxxx
To Prepaid Insurance A/c xxxxxxx
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