When unexpired insurance is recorded in the Trial Balance, where should it be reported in the financial statements?

Show Answers

Charged to the Profit and Loss AccountAdded as an expense in the Profit and Loss AccountListed under liabilities in the Balance SheetPresented as an asset in the Balance SheetNot reported anywhere

Explanation

Unexpired insurance, also known as prepaid insurance, represents a future economic benefit and therefore qualifies as an asset. It should be reported on the asset side of the Balance Sheet. It is incorrect to treat it as an expense by debiting or crediting the Profit and Loss Account, and it does not belong under liabilities. Thus, option D is the correct choice.