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
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