A two-year insurance policy paid for on l July would initially be recorded in an asset account called:

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Prepaid insurance is an asset account that represents insurance premiums paid in advance. The payment for a two-year insurance policy on July 1 would be recorded in the prepaid insurance account, which is considered an asset because it has not yet been used. This account will be gradually reduced over time as the insurance premiums are recognized as expenses in the financial statements. The other options, debtors, insurance payable, and unearned insurance, do not accurately describe the nature of an advance payment for an insurance policy.

A Two-Year Insurance Policy Paid for on L July Would