Gonzalez Corporation purchased a $600 two-year insurance policy for cash. The jo

Question

Gonzalez Corporation purchased a $600 two-year insurance policy for cash. The journal entry would require x. debit to Prepaid Insurance and a credit to Cash. debit to Insurance Expense and a credit to Retained Earnings. debit to Insurance Expense and credit to Cash. debit to Insurance Expense and a credit to Accounts Payable. One of the customers of Dunkelberger Roofing, Inc. paid $223 on her bill. The journal entry that Dunkelberger Roofing, Inc. would record is: debit Cash and credit Accounts Receivable. debit Cash and credit Sales. debit Accounts Receivable and credit Cash. debit Accounts Receivable and credit Sales. The matching (expense recognition) principle in accounting requires the matching of:

Explanation / Answer

20) When a company pays insurance for 2 years, there is a need to apply the matching concept which states that expenses should be expensed in the period for which they relate. Thus , when a 2 year policy is purchased, the company prepays its insurance and hence there is a need to create an asset in the year of transaction. Hence we should debit the prepaid insurance account and since we have paid for it, cash has to be credited

Correct Choice: A

21) When a customer pays off his dues, then we will receive cash against the receivable that we create during the booking of revenue. Thus on receiving the dues from customer, we will receive cash and we need to remove the claim of the customer from our accounts receivable

Thus we need to debit cash and credit accounts receivable

Correct Choice: A

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