On December $1,$ Year $1,$ the company paid $$1800$ for $12$ months of Insurance coverage beginning on Dec $1,$ year $1.$ We are in Dec $31$st$.$On December $1,$ Year $1,$ the company paid $$1800$ for $12$ months of Insurance coverage beginning on Dec

$1,$ year $1.$ We are in Dec $31$st$.$

When cash is paid before goods$/$services are used

Asset is increased$-$ prepaid expense $(A+)$

Cash is decreased $($A$-)$

$$1800$ prepaid expense $(A+)(debit)+$ Cash $-$$$1800(A-)(credit)=0$

When goods$/$services are used

Expense is recorded $(E+,SE-)$

Asset is decreased $($A$-)$

When expense is incurred:

If cash was paid and previously recorded,

the adjusting entry is

DEFERRED EXPENSE

Expense $(+$E$,-$SE$)$

Prepaid Expense $(-A)$

$$\frac{1800}{12}=$$$\frac{150}{m}o$

$$1800$ prepaid expense $)($debit$)+$ Cash $-$$$1800($A$-)($credit$)=-$$$150($E$+,$ SE$-)($debit$)$

$$150.$ Write the A$=$ SE$+$L equations for each scenario the way i tred to do in the example