Accounting for IGCSE & O level - The Fundamentals Of Accounting (Section 4 - No. 47)
If a business has paid for insurance in advance, what is the correct accounting treatment?
Debit insurance expense and credit cash.
Debit prepaid insurance and credit cash.
Debit cash and credit insurance expense.
Debit insurance expense and credit prepaid insurance.
Explanation
The expense should be matched with the period it relates to.
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