at the end of 31 december, Shein traders made a payement of N$50 000 for insurance for the month of january 2021, at the end of 31 december 2020 this transaction should be treated as? site

Question

Marisa Powell

Social Studies

12 June, 16:00

at the end of 31 december, Shein traders made a payement of N$50 000 for insurance for the month of january 2021, at the end of 31 december 2020 this transaction should be treated as? site

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Answers (1)

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Mariana Gamble · Answer 1

A prepayment

Explanation:

A prepayment refers to a payment by a business as an advance payment for goods or services to be received later in the future. A prepayment is also known as a payment in advance.

A prepayment is recorded an asset under the current assets in the balance sheet.

Since the $50,000 payment is made by Shein traders for insurance for the month of january 2021, at the end of 31 december 2020 this transaction should be treated as a prepayment and included under the current assets in the balance sheet.