outstanding salary a/c---dr   20000
   to salary a/c                     20000
insurance a/c  dr             5000
   to prepaid insurance a/c          5000

Salary a/c dr.            20000
     to outstanding a/c       20000
Prepaid insurance a/c dr. 5000
     to insurance a/c         5000

staff salary a/c dr....20000
   to salary payable a/c.........20000

here staffsalary are shown in p&l a/c and salary payable a/c
is shown in the liability side of the balace sheet as 
current liability

prepaid insurence a/c dr......5000
   to cash/bank.......................5000

here 
prepaid insurence is shown in the asset side of the balance 
sheet as current asset

question not clear

1,   SALARY A/C DR    20000
  TO SALARY OUTSTANDNG     20000 , HERE SALARYIS            
OUTSTANDING SO THIS IS CURRENT LIABILITY , SALARY WILL GO 
TO P&L A/C EXPENSE

 2, PREPAID INSURANCE A/C DR
    TO BANK / CASH , PREPAID INS. IS CURRENT ASSET

Dear Venkata Subbaiah garu It seems you answered it in a 
hurry mood
1. Outstanding salary means Expenditure incurred but not 
paid.Ex. March month salary paid in April.  To know true 
and correct profit You have to Debit salaries account and 
credit Payables a/c . So the entry will be 
Salaries a/c          Dr 20,000/-
Outstanding salaries a/c           20,000/
(Being payable salary for the month brought into account) 
2. Prepaid Insurance means A part of premium belongs to 
next accounting year. So to take actual amount of insurance 
expenditure into account you have to transfer such amount 
which relates to next year. So the entry will be 
  Prepaid Insurance a/c        Dr  
To Insurance a/c
 By crediting the expenditure we are reducing the 
expenditure to the tune of next accounting year.

Sajeer saab You did a mistake in the second answer. Prepaid 
insurance is an adjustment entry to be passed in the year 
end. Insurance was already paid and entry was passed . with 
your entry cash will be unnecessarily reduced to the tune 
of 5000. So once again verify your answer and question. The 
right answer is 
 Prepaid Insurance a/c           Dr
 Insurance a/c
(Prepaid insurance was created and reduced from insurance )

mr mudnoori, ihave a doubt, can we credit an expense?,as 
insurence is an expense.here mr sajeer may be cosidering 
insurence paid on march, which  belongs to april so his 
entry is correct,otherwise entry will be pass as follows

prepaid insurence a/c dr..........
   to cash/bank........cr
(being insurece paid for one year)
then monthly entry is

insurence a/c dr.........
 to prepaid insurence.......cr

Areena very good question put by you. Insurance is not 
related to Aprils expenditure. Generally Genaral insurance 
will be paid for a period of one year. It is quite usual to 
pass an adjustment entry for the expenses which benifits 
more than a year.More over to reduce the ependiture or 
income we have to reverse the natural poostion of ledger 
accounts.So crediting expenditure is quite justifiable. To 
confirm my answer you can refer any practicing person or 
our commerce books. Another example for recersing entry is 
about fixed assets. The natural position of fixed assets 
are always DEbit. While creating depreciation on asset we 
are reversing the natural position into credit
       I think you may be satisfied with my answer.Pl refer 
if any thing thru this or with my mail 
id.satyaki_raju@yahoo.co.in

Very interesting discussion between you and Mudunoori. 
Prepaid Insurance is an asset and will on assets side of 
Balance Sheet. But according to you Prepaid insurance was 
closed. So thin well before answering any question. Another 
thing I want to comment is the Question is not properly put

salary a/c                    dr.         20000
to outstanding or salary payable a/c              20000

Prepaiad insurance a/c        dr.         5000
to insurace Premium a/c                            5000