Tuesday 20 August 2013

Accounting for prepaid insurance with fully quoted annual premiums.

Posted by Labels:
Example of fully quoted annual premiums recorded as prepaid assets 


Assume an insurance company provides a quote for an annual coverage for business interruption insurance to Company ABC. The quote indicates the annual premium is $120,000 with $10,000 payable monthly on the 15th of each month.

Even though this appears to be a simple transaction from an accounting standpoint, it may not be so. And here is why. Some companies account for the full quoted premium at the beginning of the coverage period by recording a prepaid asset of $120,000 and an insurance accrual of $120,000. 

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1 comment:

  1. albina N muro18 November 2013 at 14:29

    Assume an insurance company provides a quote for an annual coverage for business interruption insurance to Company ABC. The quote indicates the annual premium is $120,000 with $10,000 payable monthly on the 15th of each month. commercialista milano

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