An asset created by prepayment of an insurance premium is:
A)Recorded as a debit to Unearned Revenue.
B)Recorded as a debit to Prepaid Insurance.
C)Recorded as a credit to Unearned Revenue.
D)Recorded as a credit to Prepaid Insurance.
E)Not recorded in the accounting records until the insurance period expires.

Question

Quizplus · Accepted Answer

When a company prepays for an insurance premium, it creates an asset called Prepaid Insurance. This is recorded as a debit because it is an increase in assets. Therefore, the correct choice is B - Recorded as a debit to Prepaid Insurance.

An Asset Created by Prepayment of an Insurance Premium Is