vasudeo007

 Profile Answers by vasudeo007 

• Oct 2nd, 2008

 

The words "pre-paid insurance" are self explanatory.

What is pre-paid insurance? The insurance that is paid in advance, before due date. This is treated like current asset.

The exact treatment is like this:

Whatever amount that is spent on insurance is shown in debit side of the Profit and Loss account the entry looks something like this:

                                          l inner columnl outer column   l
                                          l                     l                         l
To Insurance Account        l    Rs. xxx      l                         l
-Prepaid insurance            l    Rs. xxx      l Rs. xxxx            l

The balance amount is shown in outer column.

Now in Balance sheet the same item is shown as current asset. This particular "pre-paid insurance" should ideally come after sundry debtors.

Vasudeo