Question

A company pays insurance premium of ₹24,000 for 12

Q: Answer-A company pays insurance premium of ₹24,000 for 12 months in advance in March 2025 for the period Ja...

Matching principle requires expenses to be recognised in the period they relate to. 18,000 is for AprilDec 2025 and should be treated as prepaid.

months in advance in March 2025 for the period January 2025 to December 2025. The accountant records the entire amount in the Profit & Loss account of FY 2024–25. Is this treatment appropriate?

A Yes, because the payment is made during the same year

B No, the entire amount should be capitalised

C No, because ₹18,000 should be carried forward as prepaid expense

D Yes, because the matching principle is not applicable

E None of these

Practice Next

More Accounts Questions

Select the number from among the given options that can replace the question mark (?) in the following series.

17, 18, 22, 31, 47, ___
Which letter-cluster will replace the question mark (?) in the following series?
RGV, UME, ?, AYW, DEF
A series is given with one term missing. Choose the correct alternatives from the given ones that will complete the series.

57, 59, 56, 61, 54, ___
Which letter-cluster will replace the question mark (?) in the following series?
NPQR, OORQ, PNSP, ____, RLUN
Which letter and number cluster will replace the question mark (?) to complete the given series?

LT6, KU12, IW24, FZ48, ____

A company pays insurance premium of ₹24,000 for 12

Solution