Question
On May 1 2020, Desa Petaling Cleaning Services paid $1,200 for a one-year fire insurance policy beginning May 1. The payment was recorded as Debit
On May 1 2020, Desa Petaling Cleaning Services paid $1,200 for a one-year fire insurance policy beginning May 1. The payment was recorded as Debit in Prepaid Insurance. On May 31 the account shows a balance of $1,200. Each month insurance expires $100 (i.e., $1,200 12 months). Based on this information, answer the following questions:
i. Make the necessary journal entries for the above transaction in complying with the concept of revenues and expenses recognition.
ii. How does accrual basis of accounting relate to assumption accounting of time period in the context of recognizing revenues and expenses?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started