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Debit & Credit for Prepaid Expenses

When insuranc...

Question

When insurance for next one year is paid in this month only, which account shall be debited?

Insurance account

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Cash account

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Prepaid insurance account

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None of these

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Solution

The correct option is C
Prepaid insurance account

Since insurance for next one year is paid in advance, it is shown as prepaid insurance by debiting the same.

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