If unexpired insurance appears in the Trial Balance, it should be:
Correct answer: D. Shown on the assets side of the Balance Sheet
- A. Credited to the Profit & Loss Account
- B. Debited to the Profit & Loss Account
- C. Shown on the liabilities side of the Balance Sheet
- D. Shown on the assets side of the Balance Sheet
Explanation
Unexpired insurance represents a future benefit because coverage remains available after the accounting date. It is therefore treated as a prepaid expense and shown as an asset.
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About Financial Statements
Financial statements present a business's financial performance and position through the income statement, statement of financial position, cash flow statement and changes in equity. Questions involve preparing and interpreting these statements, adjusting entries, depreciation, closing inventory, accrued and prepaid items, and distinguishing profit from cash flow.
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