If prepaid insurance is initially recorded as an asset, no adjusting entries will be required in the future.

Question

Quizplus · Accepted Answer

Prepaid insurance is initially recorded as an asset because it represents a future benefit that has already been paid for. However, as time passes and the insurance coverage is used up, the prepaid insurance becomes an expense. Therefore, adjusting entries will be required in the future to reflect this change in status from asset to expense.

If Prepaid Insurance Is Initially Recorded as an Asset, No