Paid premium for two-year insurance … This means that all asset, all liabilities and all equity accounts should be included. Selling services for cash. assets. Insurance expense decreases the value of owners’ equity by $20,250 hence debit the insurance expense for $20,250. The accounting equation for a sole proprietorship is: The accounting equation for a corporation is: Assets are a company's resources—things the company owns. The insurance coverage doesn’t become an expense until time passes. 42. from five star supply,$700.00. The prepaid insurance account had a balance of $9,600 at the beginning of the year. Access the answers to hundreds of Accounting equation questions that are explained in a way that's easy for you to understand. What are the journal entries to be prepared on December 1 … assets, liabilities, and capital (or "equity"). The insurance was purchased on July 1 of the same year for one year of insurance coverage, with coverage beginning on that date. Example of liabilities are accounts payable and notes payable. TRANSACTIONS: 1.received cash from owner as an investment,$3,000.00. A Company Purchased $100,000 In Prepaid Insurance. Accounting equation can be used to show the economic effects of an accounting transaction. For every All other account balances remain unchanged. A prepaid expense is an expenditure paid for in one accounting period, but for which the underlying asset will not be consumed until a future period. For the above journal entry the accounting equation is affected as below: {Assets (− Prepaid