on january 1 the prepaid insurance account had a balance of $6000 that represented 6 months work of advance payment. it is now the end of March and there have been no adjustments to the account balanc

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Prepaid Insurance
Insurance paid for in advance is known as prepaid insurance (Lessambo 69). In this question, Prepaid Insurance account had a $6,000.00 balance from the previous accounting period. This amount is enough to pay insurance premiums for six months. This means that an insurance expense of $1000 is incurred monthly. Being the 31st of March, new changes to Prepaid Insurance account need to be made because an expense (insurance) has now been incurred for three months.
This assignment discusses the insurance expenses to record until the last day of March. Prepaid expenses are all payments made in advance for the expenses which have not yet been incurred (Lessambo 73). According to the expense recognition principle, Expenses are recognized as incurred regardless of the time frame when they are paid or show as paid. Prepayments are not recorded as an expense because they have not been used up to generate revenue. Prepayments are therefore shown in accounting books as assets. No adjustments are made to prepaid expenses at the end of an accounting period.
Insurance premiums are mostly prepaid in nature. Therefore Prepaid Insurance account is debited and Cash or bank accounts credited for the same amount paid. When the prepaid amount is partially or fully charged, the balance in the prepaid account is reduced (Lessambo 72). In this question, as of the 1st of January, the Prepaid Insurance account closed with a debit balance of $6,000.

00. At the end of March, $3000 is charged. This $3000 is the amount of insurance premiums incurred for the three months but was already paid for in advance. At the end of March, an expense Insurance account is credited with $3000. This $3000 is, therefore, the amount of insurance expense to recognize at the end of March.
Work Cited
Lessambo, Felix I. “Prepaid Expenses, Unearned Income, and Other Current Assets.” Financial Statements. Palgrave Macmillan, Cham, 2018. 69-73.