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Insurance Policy Accrual and Cash Basis

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On March 1, 2003, a company paid a $16,200 premium on a 36-month insurance policy for coverage beginning on that date. Refer to that policy and fill in the blanks in the following table:
Check 2005 insurance expense:
Accrual, $5,400; Cash, $0. Dec. 31, 2005,
asset: Accrual, $900; Cash, $0.

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This solution shows how to account for a premium in an insurance policy for a company.

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Under cash accounting, all expense would be recorded when the cash is paid and there would be no asset ...

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