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Prepaid insurance at year end is shown as:
AAsset on Balance Sheet
BLiability on Balance Sheet
CIncome credit in P&L
DReduction from capital
Answer & Solution
Correct answer: A. Asset on Balance Sheet
1. Prepaid insurance pertains to the next period's coverage.
2. It is a current asset at year end.
3. The corresponding amount is removed from P&L insurance expense.
_Source: ICAI BoS Foundation Paper 1, Ch 7 U1 "Final Accounts", §1.2 ¶4_
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