056 Insurance - Inventory

056 Insurance – Inventory

Expenses

Semi-Fixed

Synopsis

Account 056, Insurance – Inventory is created to record the amount of monthly insurance premium paid or payable for damage or theft coverage on New and/or Used Vehicles while financed on the dealership’s Floorplan line of credit.

Debits

Credits

The amount of Insurance expense paid or payable for coverage of New and Used Vehicles on Floorplan
Other monthly vehicle Insurance expense

Example 1

Record the $4,684 monthly expense for the insurance premium for the damage or theft of New and/or Used Vehicles. The monthly expense for the New Vehicles Department is $2,896 and $1,788 for the Used Vehicles Department.

Journal: Standard Entries Journal

Entry:		Debit	Credit
Account 056-01	Insurance – Vehicle Inventory – New Vehicles Department	$2,896
Account 056-02	Insurance – Vehicle Inventory – Used Vehicles Department	$1,788
Account 271	Prepaid Insurance		$4,684

Distribution of Expenses

	Departmental Distribution
056 Insurance Inventory	New Veh.	Used Veh.	Lease & Rental	Mechanical	Body Shop	Parts & Access.	Gen & Admin.
	01	02	03	05	06	07	09
Insurance premiums paid or payable to cover damage to New and Used Vehicles in inventory	Vehicles covered	Vehicles covered
Other vehicle insurance expense	Vehicles covered	Vehicles covered

Comments

The monthly provision for payment of premiums for Insurance coverage of vehicles in inventory is debited to this account.

Departmental Distribution