Accounting for IGCSE & O level - Preparation Of Financial Statements (Section 23 - No. 12)
What is the impact on the accounting equation of recognizing the expiration of prepaid insurance?
Increase assets, increase equity.
Decrease assets, increase expenses.
Decrease assets, decrease expenses.
Increase assets, decrease liabilities.
Explanation
As prepaid insurance expires, the asset decreases and the insurance expense increases.
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