Adjustment of prepaid insurance, Financial Management

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Accountants should not reverse the adjustment of prepaid insurance to recognize insurance expense at the end of the accounting period because:

Answer

a. . doing so results in a change from accrual basis accounting to cash basis accounting.

b. . Prepaid Insurance is a liability account.

c. . Prepaid Insurance should never be adjusted.

d. . there is no transaction in the following accounting period to offset a reversing entry as there is for the accrual of assets and liabilities.


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