Start networking and exchanging professional insights

Register now or log in to join your professional community.

Follow

Prepaid insurance is shown on the financial statement as?

(a) Current Asset

(b) Current Liability

(c) Fixed Asset

(d) Income

user-image
Question added by Almutaz Bakry Sidahmed , Internal Audit Manager , Banan real estate
Date Posted: 2015/03/14
Ahmed kandil
by Ahmed kandil , Cost Controller , Battour Holding Cpompany

It consider Current assets

Tegegne Abrham
by Tegegne Abrham , General Manager , MM BEDDING INDUSTRIES PLC

The appropriate answer from the options is current asset. I usually don't agree classifying prepayed insurance as current asset. Because current assets are assets that can be changed or realised into cash in the coming12 months from the date of the balance sheet date. Therefore can insurance payed in advance be changed or realised into cash like account receivable or inventory within12 months? If the answer is yes it can be but in usual circumstances it can't be realised. For this reason I prefer to take it into other asset. It affects financial statement analysis like working capital analysis. Regards

Shahin Mahmud
by Shahin Mahmud , Accounts Officer , Nasir Group of Industries

Prepaid insurance is a Current Asset

Ahmad Ismail
by Ahmad Ismail , Chief Accountan's , Retaj Tours

A- Current assets ( Balance sheet accounts ) 

 

Hafiz Umar Farooq
by Hafiz Umar Farooq , Assistant Manager Finance , Hydroturf International FZCO

it will be an asset because you paid an expense before it accrued.

Muhammad Sajjad
by Muhammad Sajjad , Chief Accountant , Hassan Kabbani Est. for Gen. Const. of Buildings (IKK Group of Companies)

OPTION A> CURRENT ASSETS............

Anas  Dawah
by Anas Dawah , Senior Internal Auditor , Talal Abu-Ghazaleh Global (TAGI)

B-                          

Current assets

Muhammad Ramzan Tufail  ACCA
by Muhammad Ramzan Tufail ACCA , Assistant Finance Manager , Eltizam Asset Management Group

Prepaid Insurance is basically an insurance that a company paid in advance to an insurance company which is related to next period. So, the proper entry for the Prepaid insurance on the payment is:

Dr. Prepaid Insurance (Increase C. Asset)

Cr.    To Cash (Decrease C. Asset) 

 

And at the end of accounting period make an adjusting entry for a related expense. that is :

Dr. Insurance Expense (Charged to P/L)

Cr. Prepaid Insurance (Decrease C. Asset)

 

So in this Question, A is the Correct Ans.

Hafiz Haroon Khalid
by Hafiz Haroon Khalid , Pharma associate , Sanofi aventis

current asset because u get benifit from  this in future

Mohsin Diwan
by Mohsin Diwan , Accountant , Quality Punch

Prepaid insurance is shown on the financial statement as "Current Assets"

Soumya Kanta Nayak
by Soumya Kanta Nayak , Branch Manager , ICICI Bank Ltd

A- Current Asset. As the expenditure will be adjusted in future

More Questions Like This