When an adjusting entry is made to record insurance expense and reduce the prepaid insurance account, which section of the statement of cash flows is affected?
A) Cash Flow from Operating Activities
B) Cash Flow from Investing Activities
C) Cash Flow from Financing Activities
D) There is no effect on the statement of cash flows.

Question

Quizplus · Accepted Answer

Adjusting entries for recording insurance expense and reducing the prepaid insurance account are non-cash transactions. They affect the income statement and balance sheet but do not impact the cash flow statement directly.

When an Adjusting Entry Is Made to Record Insurance Expense