[GNC] How To Handle Prepayments

[Michael or Penny Novack]

On 12/15/2018 4:06 PM, tbalaban wrote:
> My Company pays an initial payment to our insurer at the beginning of each
> policy year. As we incur insurance costs based on event participants, that
> initial payment is charged. After it is exhausted we get a monthly bill for
> the amount due. In no case do we ever get the initial payment back.
>
> I'd like to treat the initial payment as a credit to insurer's A/P account
> then each month create a bill for the amount payable.
>
> Is this the correct way to handle such a transaction?
>
What do you mean by "correct"? WHY would you want to do this?

Look, I really should not be giving accounting/tax advice, but normally 
you make that sort of decision on what tax law allows. It is normally 
advantageous to "expense" a business expenditure (not treat as an asset) 
if you are allowed to.

I suggest you consult your accountant whether you have to treat as a 
"wasting" asset something with a "life" of less than one year.

Michael D Novack