Switch between recording the policy as an asset first and as an expense first.
| Dec 26 | Prepaid insurance | 2,400 | |
| Cash | 2,400 |
| Dec 31 | Insurance expense | 100 | |
| Prepaid insurance | 100 |
The same idea works for unearned revenue: record the $3,000 as revenue on Dec 26, then at Dec 31 move the $2,750 not yet earned into Unearned Consulting Revenue. Ending balances match the liability-first method.
Some companies record a prepayment as an expense the day it is paid, and cash received in advance as revenue the day it arrives, instead of recording an asset or a liability first. That is allowed — as long as the December 31 adjustment moves the unexpired or unearned share back onto the balance sheet. The adjusting entry looks different from the asset-first or liability-first version; the ending balances land in the same place either way.