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Why is prepaid insurance a short term asset?

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Question added by Deleted user
Date Posted: 2015/03/17
VENKITARAMAN KRISHNA MOORTHY VRINDAVAN
by VENKITARAMAN KRISHNA MOORTHY VRINDAVAN , Project Execution Manager & Accounts Manager , ALI INTERNATIONAL TRADING EST.

The premium on insurance are generally on Annual basis covering a period of One year and the policies are becoming effective or get renewed during anytime of the current accounting year and the unrecognized portion of the current year premium are treated as Prepaid insurance as the expense covers more than One accounting year in which it is incurred.

Mark Angelo Damuag
by Mark Angelo Damuag , Financial Analyst , Evacare Management Consultancy Inc

Prepaid insurance is a short term asset since most insurance is good for one year only.

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