what are Unexpired Account in accounting
Unexpired Account are the same as prepaid account means the benefits of the accounts already spend will be available in the next accounting year.Such type of expenses is called prepaid or unexpired account.
In such cases it is very necessary to adjust unexpired part of accounting.
Adjustment for the following type of accounts will be
Prepaid A/c/ unexpired A/c dr
take an Example of Prepaid Accounts
A Ltd paid their Insurance premium on 1 Jan 2014 for Rs 12,000 and the accounting year close on 31 march 2014.
under such condition when insurance premium is paid on 1 Jan 2014
Journal entry will be
Insurance A/c Dr 12,000
To Cash A/c 12,000
(being payment of insurance premium paid)
When adjustment of insurance premium is made on 31 march 2014 at the end of financial year.
Prepaid Insurance A/c 9000
To Insurance Premium A/c 9000
(adjustment of insurance premium made)
Under this prepaid insurance will be treated as current assets because it is expense paid in advance there fore while preparing Profit and loss account it will be deducted from insurance account and it will be added in the asset side of balance sheet.
Leger of Insurance Premium
|By Prepaid Insurance
To P/l A/c
Prepaid Insurance Premium
|To Insurance premium
|To Bal. C/D||9,000|
|TO Insurance Premium 12,000
Less Prepaid Insurance 9000