Is insurance included in accounts payable?
submitted by andy
matobetobe
Yes, if it is outstanding.
Karl
INSURANCE is an asset account, never a liability or a payable. You don't get the insurance before paying for it. You always pay first.
Suppose an entity purchased a 2-yr insurance on Jan 1 for 2,000. On the date of purchase, the entry will be:
dr Insurance 2k
cr Cash 2k
At the end of the first year one-half of the insurance has already expired. This used part is no longer an asset but is expensed.
The entry on Dec 31 of that year is
dr Insurance Expense
cr Insurance
for the amount of the expired part.
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