VESPER

Accounting Foundations

Adjusting Entries Timeline

Northstar Services · Dec 31 · Scenario 1

On October 1, Northstar paid $1,200 for a 12-month insurance policy and recorded Prepaid Insurance.

Record the December 31 adjusting entry for the coverage used.

Source document

Policy NS-INS-12 — $1,200 for 12 months from October 1

Timeline

Oct 1 — paid $1,200Dec 31 — reporting date

Coverage

12 months

Monthly cost

$100

Months elapsed

3 (Oct, Nov, Dec)

Time calculation

$1,200 ÷ 12 × 3 = $300 used

T-accounts

Insurance Expense

Normal balance: debit

Debit

—

Credit

—

No entry yet

Prepaid Insurance

Normal balance: debit

Debit

—

Credit

—

No entry yet

Cash

Normal balance: debit

Debit

—

Credit

—

No entry yet

Journal entry

Total debits—
Ledger idle
Total credits—

Posting is blocked until total debits equal total credits.