Which of the following statements is correct?
A) When an insurance premium is paid in advance, the payment is normally recorded in a liability account called Prepaid Insurance.
B) Goods and services are commonly sold to customers on the basis of oral or implied promises of future payment, called promissory notes.
C) Increases and decreases in cash are always recorded in the equity account.
D) An account called Land is commonly used to record increases and decreases in the land and buildings owned by a business.
E) None of these statements are correct.

Question

Quizplus · Accepted Answer

None of the statements are correct. Prepaid Insurance is an asset account, not a liability. Goods and services sold on credit are recorded as accounts receivable, not promissory notes. Cash transactions affect the cash account, not equity. Land and buildings are recorded in separate accounts, typically Land for land and Buildings for buildings.

Which of the Following Statements Is Correct