Accounting for IGCSE & O level - The Fundamentals Of Accounting (Section 30 - No. 32)
A company purchases a one-year insurance policy in December. How is this treated for the first month?
It is recorded as an expense.
It is recorded as a liability.
It is recorded as prepaid insurance (an asset).
It is not recorded.
Explanation
The purchase is first recorded as a prepaid insurance (asset).
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