yo yo what is up family CPA strength here strongest CPA in Florida how's
everybody doing I've had like a crazy morning nothing
was working but I'm here now and for all the technical difficulties let's get
this n do we here man we're kind of getting to be like a nice little mature
a series here this is your first time welcome this is you're 30-something
50-somethings video thanks for coming back if you want to see the best
playlists best accounting playlist on the youtubes hit up here because that's
what it is County for beginners number 32 can you believe we made it this far
let's go what are we going to do the 30 second installment of the classic series
the Class six series what are we going to do we're going to do another
adjusting entry like we did in the other one look at in 31 your depreciation
window adjusting entries CPA strength JT blaze we don't do adjusting entries
today I'm going to do I'm going to do a prepaid expense I'm going to do a
prepaid expense today you guys ready are you ready cuz I'm ready prepaid expense
folder go any further
yeah before we go any further voids getting big height and weight
jacked and tan thank you very little just the entries
when do a prepaid Express right before we do anything write this out in your
paper I already know you have it on your paper thank you very much good students
you're not lazy if you're lazy write this on your paper if you have no idea
what this is refer to my other videos DC aid ler debit credit asset draw expense
liability equity revenue prepaid expenses here's we're going to do let's
just stop and think about a little bit prepaid expense so it's an expense that
I've pre paid I paid pre I paid for the expense before I used it prepaid that's
what kind of prepaid I prepaid I paid for something and I'm going to use it at
a later that's what your prepayment is right on
December 1st you paid $2,400 for one year insurance
when you pick for something a year at a time it's in the middle it's in the
middle of your year is December 31st the end of the year now you're not going to
do all your annual subscriptions on January 1st so they're going to be in
the middle of the year sometime this one you found a new insurance company good
deal you got a good deal you couldn't pass it up you said I'm going to get my
insurance December 1st so the journal entry for that is because you have cash
a journal entry on December 1st is let's always do our cash first you paid 2400
so you have cash leaving cash is an asset you have asset leaving the
business so you would credit it so you kind of credit the cash for 2400 deserve
journal entry but what is the debit now let's think about this what do you have
the ILA of money for you have the outlay of money for insurance for a whole year
have you used any of the insurance at December 1st yet no you haven't used it
you haven't used any of it it's all it's all prepay a prepaid insurance is also
is also an asset right you just trade it you just traded this asset for another
asset it's like ready to go for you mmm in my head it's kind of like buying like
another one like like depreciating office equipment like you have this you
have equipment here that's going to be lasting for years and years for multiple
periods and you would expense as as you use it basically that would be
depreciation so that's kind of or prepaid insurance or prepaid expense is
you you have you have it you have it ready to go you haven't used any of it
you haven't used it yet so you haven't expensed it yet so that's an asset
prepaid insurance or prepaid whatever is an asset because it's it's there ready
for you to use think you haven't used it yet you just
hooking asset to get this asset thing is let's make let's make an interesting
entry for the end of the year 1231 just assume I'm just most businesses again
what does that called a calendar year most businesses that I work with on a
calendar year 1231 is the end of the accounting cycle the end of the period
unless I say hello my examples are going to be 1231 I think it's just easier for
everyone to remember so it's complicated for these basics 1231 is the end of our
accounting cycle you want to make an adjusting entry for the end of the year
so now we're going to do some now we're going to do some calculations but now
the dates kind of make are a little more important so we have to write a 12 12 31
here all right now we're going to make our December 31st but December 31st is
going to be our adjusting journal entry for our prepaid expense now you got to
think all right I mean there's a bunch of different ways I want to start with
24 2400 was the hole was the how much you paid for the whole the whole year so
2400 twelve months twenty four hundred dollars divided by twelve months $200
$200 per month $200 per month is how much you're using of the of the
insurance of your prepaid prepaid insurance is how much you are using now
you got to think others guess you can for all right so you know it you know
it's $200 you've had the insurance for a month then you can either do the debit
or the credit we get different color here and you need to do the debit or the
credit here to make the adjusting entry it's up to you wherever you whatever
makes more sense to you on this so this is kind of this is kind of a trickier
one it's a it's a prepaid expense because insurance usually is an expense
now you have it as an asset so I don't know would you know if
if this is given journal entry for you already and to make an interesting entry
friend of the Europe based on this journal entry has already done well
let's think about it insurance insurance is usually an expense it's usually
something that you pay out in order for your business to go and make more money
you know to be safe and have things so it's usually insurance is usually an
expense now you have it on the books as an asset because you've prepaid for it
so at the end of the year you're thinking well how much have I used and
how much am I going to use as an expense for this year so in this journal entry
you're going to have an expense okay what do you think it's probably any
insurance expense because that's what prepaid insurance is for so we're going
to have debit of insurance expense a debit expense right here it's a pot in
the normal balances it would be a debit so we're going to have insurance expense
alright so we've got insurance expense for our debit now how much this is
December 31st here and we bought the prepaid at December 1st so a month has
gone by so how much have we uses so a month has gone by 24 hundred divided by
12 months it's $200 per month so we so in one month we've used $200 worth of
our prepaid insurance so $200 is the amount of our debit for insurance
expense 200 hours insurance expenses are debit okay what's our credit let's go
let's go come on do you guys know it anything this is kind of fun this is uh
this is hard I'm going to say this is artists this is not this is kind of
maybe a intermediate thing in my opinion here but bear with me bear with me here
we're going to have $200 as our car yes I know we've already we've already used
a cache we've already used cash to put this on on the books we we're just kind
of traded we had we had cash here we had cash in our bank account we basically
gave our cash away before to get this in place of cash this is kind of almost a
cash usually for an expense the if you pay it right away the credit would be a
cash credit but before you've prepaid so you've kind of made the you've turned
the cash into a prepaid insurance account you've used now prepaid
insurance as an asset you've used some of that prepaid insurance up you've used
$200 of that prepaid insurance up so that's the death the account that we're
going to credit your prepaid insurance so journal entry is making just entry
for end of the year for the December December first pay $24 for one year
insurance this makes sense because you've had you've had the insurance for
a month you used $200 of it that's the debit insurance expense you want to
lessen so you want to lessen this account by $200 so if you're going to
look at your t account or whatever so what's in the prepaid insurance accounts
it's an asset and that was the debit she had it for $2,400
now you've - different 200 so the the prepaid asset account has twenty two
hundred dollars left eleven months more anyways I hope you liked it this was
kind of an intermediate