Asked by Ak-mu Chelc on Jun 29, 2024
Verified
Before an adjusting entry is made to recognize the cost of expired insurance for the period,Prepaid Insurance and Insurance Expense are both overstated.
Prepaid Insurance
An asset account that represents the amount paid for insurance contracts in advance for future coverage.
Insurance Expense
The cost associated with purchasing insurance coverage, recognized as an expense over the policy period.
Adjusting Entry
An accounting journal entry made at the end of an accounting period that ensures all financial statements are updated to reflect accurate and fair information.
- Identify and record variations for advanced expenses and unearned proceeds.
- Acknowledge the consequences of adjusting entries on the accounts within financial statements.
Verified Answer
SB
SimranG BassiJul 01, 2024
Final Answer :
False
Explanation :
Before an adjusting entry is made, Prepaid Insurance is overstated because it includes the cost of insurance that has already expired, but Insurance Expense is understated because it has not yet been increased to reflect the cost of the insurance that has expired during the period.
Learning Objectives
- Identify and record variations for advanced expenses and unearned proceeds.
- Acknowledge the consequences of adjusting entries on the accounts within financial statements.