Prepaid insurance is a kind of prepayment that stands for the instalments made for the expenses which have not been procured yet. Hence, the management of such an expense type should include reconsideration in terms of the accounting information on the overall budget. It is generally required to analyze which part of the prepayments might be transferred to the expense section of a budget, being no longer a current asset (Weygandt, Kimmel, & Kieso, 2015). Thus, once the insurance asset was somehow utilized during the accounting period, it should be adjusted in the final report.
In terms of the budgeting notion for practically every business, the amount and value of fixed assets are of paramount importance to the overall picture. Depreciation expense record, thus, stands for the journal entries that reflect the useful life of the following assets. Since during an accounting period, fixed assets tend to be modified in terms of their average cost to the company and effect on the process, the following entries are to be adjusted within the period.
When managing a business, particularly a small one, owners are to make sure that money is provided for all the goods and services that tend to increase the potential revenue. However, quite frequently, paid services cannot be provided timely, being transferred to the unearned service revenue (Weygandt, Kimmel, & Kieso, 2015). At the end of the accounting period, these entries are to be adjusted based on whether they start bringing earned revenue to the overall business profits.
Another aspect that requires an ongoing adjustment process is the amount of interest payable. When calculating a company’s expenses, the entry of the interest rate should be filled according to its percentage multiplied by the accounting period duration (Weygandt, Kimmel, & Kieso, 2015). However, sometimes that interest variable might be influenced by some external factors like inflation, making it necessary to reconsider the regular payment amount.
Reference
Weygandt, J. L., Kimmel, P. D., & Kieso, D. E. (2015). Accounting principles (12th ed.). Hoboken, NJ: Wiley.