How to book deferred acquisition costs
Capitalizes costs directly related to acquiring new insurance business to be amortized over the policy term.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Deferred Acquisition Costs (DAC) | Asset | 5,000.00 | - |
| Commission Expense / Cash | Expense | - | 5,000.00 |
💡 Accountant's Note
Under accrual accounting, MGAs defer costs that vary with and are primarily related to the acquisition of new and renewal insurance contracts.
Practitioner & Systems Framework
💻 ERP Architecture
Automate DAC amortization schedules to match the Unearned Premium Reserve (UPR) run-off.
⚠️ Audit Flags
Deferral of costs that are not directly related to successful contract acquisitions.
📄 Required Documentation
Detailed schedule of acquisition costs including sales commissions and underwriting labor.
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Expert Analysis by Qusai Ahmad
General Accountant Supervisor & IFRS Specialist
Specialized in SAP GUI automation and Middle Eastern tax compliance. Building digital tools for the next generation of finance leaders.
Related Journal Entries
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Premium Trust Account — Client Premium Received (Not Broker Revenue — Fiduciary Obligation)
Discussion & Community Questions
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