What is the normal balance for the prepaid insurance account?
Acct1: Classifying Accounts and Normal Balance SidesABThe normal balance side of SUPPLIESDebitThe normal balance side of PREPAID INSURANCEDebitThe normal balance side of ACCOUNTS RECEIVABLE–SAM ERICKSONDebitThe normal balance side of ACCOUNTS PAYABLE–STAPLESCredit43 more rows.
Where does prepaid insurance go on balance sheet?
Prepaid insurance is considered a business asset, and is listed as an asset account on the left side of the balance sheet. The payment of the insurance expense is similar to money in the bank, and the money will be withdrawn from the account as the insurance is “used up” each month or each accounting period.
Does prepaid insurance have a credit balance?
The monthly adjusting entry causes the prepaid insurance to become a credit balance. So, essentially, even if you haven’t made payment, but you still have the automatically credit the prepaid insurance that’s a way to create your credit balance on a prepaid insurance asset account.
What is the capital account’s normal balance?
Asset accounts normally have debit balances, while liabilities and capital normally have credit balances. Income has a normal credit balance since it increases capital . On the other hand, expenses and withdrawals decrease capital, hence they normally have debit balances.
Does prepaid insurance have a normal credit or debit balance?
You pay upfront and use the insurance throughout the year. When you buy the insurance, debit the Prepaid Expense account to show an increase in assets. And, credit the Cash account to show the loss of cash. Each month, adjust the accounts by the amount of the policy you use.