Which of the following entries records the payment of a bill for your insurance premium?
A) debit Prepaid Insurance; credit Cash
B) debit Insurance Payable; credit Accounts Receivable
C) debit Accounts Payable; credit Cash
D) debit Cash; credit Prepaid Insurance

Question

Quizplus · Accepted Answer

Payment for an insurance premium is recorded as a debit to Prepaid Insurance (an asset account) and a credit to Cash (an asset account). This is because the payment results in a decrease in cash (an outflow of cash) and an increase in prepaid insurance (an asset account representing insurance coverage that has been paid for but not yet used).

Which of the Following Entries Records the Payment of a Bill