The adjusting entry to record the amount of prepaid insurance used or expired would involve a
A) debit to Prepaid Insurance.
B) credit to Cash.
C) credit to Insurance Payable.
D) debit to Insurance Expense.

Question

Quizplus · Accepted Answer

The adjusting entry to record the amount of prepaid insurance used or expired would involve a debit to Insurance Expense, which represents the expense incurred during the period, and a credit to Prepaid Insurance, which represents the reduction in the asset account due to the expired portion of the policy. This entry follows the accrual accounting principle of matching expenses with revenue in the period they are incurred. Choices A, B, and C are incorrect because they do not reflect the proper accounts affected by the adjustment.

The Adjusting Entry to Record the Amount of Prepaid Insurance