Accounting chapter 2 homework

Answer:

When insurance is a short-term asset, how does it work? Most insurance premiums are paid for only one year at a time, so prepaid insurance is usually a short-term or current asset. The majority of insurance premiums are paid once or twice a year. Most of the time, prepaid insurance is a current asset because it can be turned into cash or used right away. But if a prepaid expense isn’t used up within a year of being paid for, it becomes a long-term asset, which doesn’t happen very often. Most of the time, prepaid insurance is an asset account with a negative balance. The debit balance shows the amount that is still prepaid as of the date of the balance sheet.