The adjusting entry to record prepaid insurance that has now been used accomplishes which of the following?
A) Increases an asset and increases an expense
B) Decreases an asset and increases an expense
C) Decreases a liability and increases a revenue
D) Decreases a liability and increases an expense

Question

Quizplus · Accepted Answer

The adjusting entry for prepaid insurance that has been used decreases the prepaid insurance asset account (since the insurance coverage period has passed, and it is no longer an asset) and increases the insurance expense account (reflecting the cost of insurance for the period).

The Adjusting Entry to Record Prepaid Insurance That Has Now