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Which of the following is an example of a deferred (prepaid) expense?

  1. A Wages owed but not yet paid
  2. B Insurance premium paid in advance for the next year
  3. C Interest earned but not received
  4. D Revenue billed but not collected
Answer

Insurance premium paid in advance for the next year

A prepayment is cash paid before the benefit is consumed, so it is recorded as an asset and expensed over the period it covers.

All Accounting MCQs

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