Answer / h.r. sreepada bhagi

When payment is made, debit the expense account with the
amount relating to that period, debit Prepaid Expenses with
the remaining and credit bank or Cash A/c. Next year as and
when the expense accrues, debit expense a/c and credit
Prepaid Expenses A/c.
For example Insurance paid in Feb,10 for the period March,10
to Feb,11 - Rs. 35000/-

Payment entry in March,10:-

Insurance A/c Dr. Rs.2917/-
Prepaid Expenses A/c Dr. Rs.32083/-
Bank A/c Cr. Rs.35000/-

Next year from April to Feb, every month pass the following
Journal entry:-
Insurance A/c Dr. Rs.2917/-
Prepaid Expenses A/c Cr. Rs.2917/-

Prepaid expenses can be divided between different accounting
period based on number of days or months, based on
materiality of the transaction.

Categorize the following journal entry in Real A/c, Nominal A/c and Personal A/c: Goods worth Rs.10,000/- destroyed by fire and the insurance company admitted the claim for Rs.8,000/- Insurance Claim A/c Dr. 8,000/- Loss By Fire A/c Dr. 2,000/- To Trading A/c 10,000/-

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