The adjusting entry will involve debiting Insurance Expense and crediting Prepaid Insurance.
Date Account Debit ($) Credit ($)
12/31 Insurance Expense 5,010
Prepaid Insurance 5,010
Insurance Expense (Debit): Represents the portion of insurance that has been used or expired during the year. This amount is calculated as the beginning balance plus premiums paid during the year minus the unexpired insurance related to future periods.
Prepaid Insurance (Credit): Represents the portion of insurance that is still unexpired or related to future periods. This amount is being moved from the asset (Prepaid Insurance) to the expense (Insurance Expense) since it has been used during the year.