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Is Prepaid Insurance An Asset Or Liability

Is Prepaid Insurance An Asset Or Liability. Insurance is an expense to the business, but is commonly carried on the books as a prepaid expense (asset) and expensed over the period of the. When the insurance coverage comes into effect, it goes from an asset and is charged to the expense side.

The Balance Sheet Format And Balance Sheet Accounts
The Balance Sheet Format And Balance Sheet Accounts from business-accounting-guides.com
Prepaid insurance is considered to be an asset in the accounting world and is said to be a business asset. Let's say xyz company who needs to pay its employee liability insurance for the whole of a fiscal year. Prepaid rent, prepaid insurance and deferred taxes. Whether the prepaid is recorded as an asset or liability is dependent on the nature of the transaction. Insurance can never be an asset in the final analysis, but a resource which wards of a liability or protects you from a liability being created.

In short, an asset is what a company owns, while the liability is what a company owes.

Unearned insurance revenue represents a liability to the insurance company and is reported with current liabilities on the balance sheet. Perhaps all at once, perhaps over time. Assets and liabilities that are not reported in major balance sheet categories are generally reported in other asset or other liability categories. Basic liability insurance is typically affordable and included in your home or renters insurance. Is cash assets or liabilities? Unearned insurance revenue represents a liability to the insurance company and is reported with current liabilities on the balance sheet.

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