Discussions List View Topic TEKS Week 3 Discussion V Available on Monday, September 7, 2020 10:38 AM CDT until Sunday, September 13, 2020 11:59 PM CDT Subscribe Understanding Prepaid Expenses, Unearned Revenue, and Accrued Liabilities. Find an account from one of the three categories listed above and describe what it is, how it is used, and provide an example of the first entry you would make to post to the account you selected. Before posting your comment, try to use an account another student has not already used. Better to post earlier in the week to avoid struggling to come up with a different account! Example: Prepaid Insurance. Your company pays all of its insurance bills on April 1, and the premium covers a full 12 months (building, auto, liability, flood, etc.). The insurance premium totals $12,000. You do not want this entire payment to be charged to expense in April because the remaining 11 months also benefit from this coverage and a large bill like that would significantly hurt your April financial results. Therefore at the end of each month, you will charge the equivalent of one month's premium to expense. This will allocate the expense over the entire period covered by the insurance (12 months) and not cause big swings in your monthly profitability. Entries: At the time payment is made on April 1. Debit: Prepaid Insurance (Asset) $12,000. Credit: Cash (Asset) $12,000 At the end of April (and each of the following 11 months). Debit: Insurance Expense $1,000. Credit: Prepaid Insurance $1,000