Accountants should not reverse the adjustment of prepaid insurance to recognize insurance expense at the end of the accounting period because:
Answer
a. . doing so results in a change from accrual basis accounting to cash basis accounting.
b. . Prepaid Insurance is a liability account.
c. . Prepaid Insurance should never be adjusted.
d. . there is no transaction in the following accounting period to offset a reversing entry as there is for the accrual of assets and liabilities.