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highpoint4
February 13, 2024
Question

Prepaid Asset removal

  • February 13, 2024
  • 1 reply
  • 0 views

Hello,

We have a Prepaid Insurance account with an almost $40,000 balance listed since at least 2020.  I am assuming it was never applied correctly over the years and the money does not exist.  How can I remove that balance from our balance sheet?  Thank you for any advice.

1 reply

Rainflurry
Rainflurry
February 14, 2024

@highpoint4 

 

It's not enough to know that "it doesn't exist".  You need to determine why it exists.  If the prepaid expense account is overstated by ~$40K, then another account is also under/overstated by ~$40K.  The journal entry to remove it is a credit to Prepaid Insurance and a debit to some other account for ~$40K.  The other account will be determined based on why the balance is still there.  Was it never applied to the actual insurance expense and therefore your insurance expense was understated by ~$40K?  Or, was there an oversight and the company paid for both the Prepaid Insurance and the actual insurance expense?  Or, was the entry that created the Prepaid Insurance balance some odd entry - like a credit to A/P or ???  Once you determine why the balance is there, it can be cleared with a simple journal entry. 

    H
    highpoint4Author
    February 15, 2024

    Dear Rainflurry,

     

    Thank you for your reply.  I went through the Prepaid Insurance registry going back to 2009.  It appears that the prepaid insurance asset was offset by the Insurance Payable liability.  However, the Insurance Payable account has been at zero dollars since 12/31/2020.  It is my assumption then that the prepaid insurance balance is overstated.  When I attempt to create the journal entry to zero out the balance, it increases the Insurance Payable by the same amount.  However, our insurance is paid and we do not owe that amount.

     

    When I go through the liabilities on the Balance Sheet I cannot locate a chart of account to which I can offset/increase the corresponding amount.

     

    Clearly I am a novice and a volunteer for the Association as have been the people before me.  

     

    Given that I am not explaining the situation well, I would appreciate if you have any other suggestions.   Again, I thank you for what you provided.

    MorganB
    MorganB
    February 15, 2024

    Thank you for following up with that additional info, highpoint4.

     

    The Community is a great place to connect with knowledgeable QuickBooks users like Rainflurry. If you need additional assistance with this matter, you may consider speaking with your accountant. If you don't currently have an accountant you can find one in your area specifically trained in QuickBooks by searching here: Find a ProAdvisor

     

    If you need an extra hand with the entry after speaking with them please don't hesitate to reach back out. Take care!

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