New Enroll in RBI Grade B New Batch - Starts on May 21

    Question

    An entrepreneur is setting up his new business. He

    purchases some equipment. He also takes insurance on the equipment for which the premium is paid for 6 months even though the business is yet to commence operations. The equipment cost and insurance for 6 months is start up cost for the entrepreneur. For the business, the insurance paid is        
    A Deposits Correct Answer Incorrect Answer
    B Inventory Correct Answer Incorrect Answer
    C Prepaid expenses Correct Answer Incorrect Answer
    D Fixed asset Correct Answer Incorrect Answer
    E Provision Correct Answer Incorrect Answer

    Solution

    Paying insurance premium is a prepaid expense for the business as it is paid in advance.

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