Question

'A three years premium paid on a fire insurance policy' should be classified as _______________.

• A. Accrued asset
• B. Accrued liability
• C. Unearned revenue
• D. Prepaid expense

Answer 1

The correct option is D Prepaid expense

A prepaid expense refers to an amount that a company has paid and a portion or all of it will be an expense in a later accounting period.

A prepaid expense can be recorded initially as an expense or as a current asset.