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Liability Insurance
Liability insurance and other business insurance are usually paid for in advance (before the period the liability was incurred). In order to post the expense to the period covered, you need to amortize the prepaid expense over the life of the policy (typically 12 months). When the liability insurance is paid, post the payment to the prepaid insurance account. Set up a standard monthly journal entry to expense one twelfth of the policy amount each month.