ICAEW AF · Chapter 8 · Question 1 of 9
A business with a 31 December year end paid an insurance premium of £3,600 on 1 April 20X4 for the year to 31 March 20X5. What prepayment should be recognised at 31 December 20X4?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) £900
Explanation
The premium covers 12 months, of which January to March 20X5 (3 months) fall after the year end. Prepayment = 3/12 x £3,600 = £900. The remaining 9/12, £2,700, is the insurance expense for the year to 31 December 20X4.
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