Deffered Expense (Prepaid)

Question 1

Expenses paid in advance, like rent, insurance, or supplies, that benefit future periods.

Answer 1

Deferred Expense

Question 2

you paid a one-year insurance premium of $1,200 on January 1. Each month, $100 of insurance is “used up,” so at the end of January, you make an adjusting entry to move $100 from Prepaid Insurance (an asset) to Insurance Expense.

Answer 2

Debit: Insurance Expense $100
Credit: Prepaid Insurance $100