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11 June, 09:58

What is the adjusting journal entry to update the Prepaid Insurance account?

A) Debit Insurance Expense

Credit Prepaid Insurance

B) Debit Prepaid insurance

Credit Insurance Expense

C) Debit prepaid Insurance

Credit Income Summary

D) Debit Income Summary

Credit Prepaid Insurance

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Answers (1)
  1. 11 June, 11:29
    0
    the correct journal entry to be recorded when the prepaid insurance payment is realized is,

    A) Debit Insurance Expense

    Credit Prepaid Insurance

    Explanation:

    prepaid insurance is an asset to the company, which means that we have paid in advance. because of this, when we pay it in advance, the entry will be

    "prepaid insurance debit

    money/bank credit"

    this asset was created because the payment we made for the insurance does not belong to this accounting time period and it belongs to the next accounting period. matching concept is the underlying concept behind this.

    once we reach the next time period, the prepaid expense becomes a actual cost and the asset is decreased.
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