Tonka Services receives a bill for a three-month liability insurance policy. The transaction would involve a

Question

Quizplus · Accepted Answer

Tonka Services would debit Prepaid Insurance because they are paying for insurance coverage in advance, and this is considered a prepaid expense. Over the course of the three-month policy period, Tonka Services will recognize the insurance expense by gradually decreasing the Prepaid Insurance account and increasing the Insurance Expense account.

Tonka Services Receives a Bill for a Three-Month Liability Insurance