b. You record the following adjusting journal entry on Dec. 31, 2007:
 

 
* $24,000/12 months = $2,000 per month x 3 months of insurance used up (October, November and December) = $6,000 total insurance expense used up by year-end.
 
This adjusting entry debits Insurance Expense, increasing the balance by $6,000 to recognize the amount of insurance used up in 2007–and credits Prepaid Insurance to reduce the account by the same amount, leaving a balance of $18,000 ($24,000 – $6,000).
 
Year-end adjustment if prepayment was recorded in an expense account. You work for a calendar year company. On October 1, 2007, you prepay a 1-year insurance premium of $24,000 for insurance effective the same date and record it in Insurance Expense. a. What entry do you record on October 1? b. What entry do you record at year-end?
 
a. You record the following transaction entry on October 1, 2007:
 

 
b. You record the following adjusting journal entry on December 31, 2007:

 
* $24,000/12 months = $2,000 a month x 3 months of insurance actually used up (October, November and December) = $6,000 insurance expense used up by year-end.
 
The credit to Insurance Expense reduces the balance in the account to $6,000, the amount of insurance used up in 2007 ($24,000 balance – $18,000 deferred for use in 2008). The debit to Prepaid Insurance–you may have to set up the account when you make the adjusting entry–leaves a balance there of $18,000.
   

Picking a Mortgage Term

So much goes into picking the right mortgage and there are so many things to consider and take into account. One of those things is the mortgage term, or how long you actually make payments on your house. Once you understand the basics however, picking the right mortgage term isn’t difficult and will result in a comfortable policy for you.
There are three terms from which you can choose: the fifteen-year term, the twenty-year term, and the thirty-year term, all of which have their pros and cons. When you’re choosing a term, you obviously want to go for the shortest term for which you can qualify (and you should also feel comfortable with whatever term you choose). The quicker you can pay off your house the better, but if your circumstances and finances don’t work well with a shorter term then it’s okay for you to sign a longer-term loan.
What’s really important in the loan term is not necessarily a difference in the amounts of your monthly payments, because those don’t really change much from the fifteen-year to the thirty-year mortgage, but where it really shows the savings is in the interest. The longer you have the loan the more money you pay in interest and that’s where the difference is noticeable and significant. Once again, if you can do the shorter term, do! If however, you don’t qualify or don’t feel comfortable with a shorter mortgage term, at least try to make additional principal payments throughout the year; this will, over time, really make a difference in how long you actually have the loan.
Probably picking the term of your mortgage will be one of the easiest parts about your mortgage application and closing process. It’s simple to understand and easy to fit into whatever financial situation you may have. If you can and qualify, choose the shorter term. If you can’t, go with the longer term but make additional payments where you can. The sooner you can pay off your loan the better!

Creating a Budget
I’ll admit it: I have a weakness for books. And ice cream. I’m an impulse buyer, the kind who can go into a store “just to look around” and leave with a bag in each hand. It’s only later that I connect my new goodies with my shrinking bank account, and later still that I realize my goodies could have been, say, food for the next week. If you’ve ever experienced the head-drooping, stomach-clenching feeling attached to that realization, you, like me, may be interested in a little activity called budgeting.

No, don’t run away. A budget is not a ball and chain meant to chafe your legs and slow you down (that’s called debt). Instead, think of a budget as a chisel you can use to escape from that particular hunk of iron. Budgeting can help you work toward any financial goals you have, whether you want a comfortable home or a new jacket. Its basic purpose is to help you stretch your financial muscles without overextending them. As long as you have some kind of income and some kind of expenses, you can make a budget of your very own.
There are more ways to make a budget than you’d think. If you enjoy the sensation of holding a pencil in your hand, you can make your budget with little more than notebook paper, though you can also use pre-made spreadsheets designed for the purpose. If you enjoy playing around with a computer mouse, there are all sorts of programs available through software and websites, some of which are both easy to use and free.
Whatever style suits you, the basic budget process is the same. First, decide whether you want your budget to cover a short time period or a long one (for example, bi-weekly, quarterly, or yearly). You may even choose to keep more than one budget so you can focus on both long-term and short-term goals.
Second, estimate the money you’ll make (income) and the money you’ll spend (expenses) during the time frame you’ve chosen. Try to make these figures as accurate as possible, but don’t worry if your first few budgets doesn’t match exactly with reality. Most people aren’t aware of their spending habits if they don’t already have some form of budget, so don’t feel bad if you need to revise your budget a few times to make it workable.
Finally, divide your estimated income into categories of things you’ll need to pay for during each cycle of your budget, using your estimated expenses as a guide. These categories usually include things like mortgage payments, gasoline, and groceries. Remember that while it’s always best to have too much money set aside for necessities than not enough––banks and utility companies aren’t terribly forgiving––the chances are you won’t stick to your budget if you don’t set aside at least a little money just for fun. Your budget should be a tool, not a prison.