The portion of the insurance premiums that has expired during the fiscal period is classified as:
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A. B. C. D.A
In accordance with the matching rule, the amount of an insurance policy that has expired during the accounting period must be recorded and classified as an expense for the period.
The portion of insurance premiums that has expired during the fiscal period is classified as:
A. an expense.
Explanation: Insurance premiums are typically paid in advance for coverage over a specified period, such as one year. As time passes, a portion of the premium that corresponds to the coverage already provided or expired during the fiscal period is recognized as an expense.
The rationale behind treating this portion as an expense is based on the matching principle of accounting. The matching principle states that expenses should be recognized in the same period as the related revenue or benefits. In the case of insurance premiums, the benefits or coverage are received over a specific time period, and the associated cost should be recognized as an expense over the same period.
By recognizing the portion of the insurance premium that has expired as an expense, the financial statements accurately reflect the costs incurred to generate revenue or provide benefits during the specific period. This helps in matching the expenses with the corresponding revenues or benefits and provides a more accurate representation of the financial performance of the company.
Therefore, the correct answer is A. an expense.