Is prepaid insurance current assets?
Daniel Santos
Updated on December 29, 2025
Prepaid insurance is usually considered a current asset, as it becomes converted to cash or used within a fairly short time.
Is prepaid insurance a liquid asset?
are short-term assets which are considered highly liquid in nature. Inventory and prepaid expenses are excluded from liquid assets as they can not be converted into cash within a few days of time. Liquid assets are not shown separately in the financial statements. They do not include prepaid expenses and inventories.
What is prepaid insurance in balance sheet?
Prepaid insurance is the portion of an insurance premium that has been paid in advance and has not expired as of the date of a company’s balance sheet. This unexpired cost is reported in the current asset account Prepaid Insurance. This is usually done at the end of each accounting period through an adjusting entry.
What type of account is prepaid insurance?
Prepaid insurance is considered a business asset, and is listed as an asset account on the left side of the balance sheet. The payment of the insurance expense is similar to money in the bank, and the money will be withdrawn from the account as the insurance is “used up” each month or each accounting period.
Why is prepaid insurance a current asset?
Prepaid insurance is usually a short term or current asset because the prepaid amount will be used up or will expire within one year of the balance sheet date. Often companies are billed in advance for insurance premiums covering a one year period or less. Hence the prepaid amount is usually a current asset.
Which is the most liquid asset?
Cash on hand
Cash on hand is the most liquid type of asset, followed by funds you can withdraw from your bank accounts.
What type of asset is prepaid expenses?
A prepaid expense is a type of asset on the balance sheet that results from a business making advanced payments for goods or services to be received in the future. Prepaid expenses are initially recorded as assets, but their value is expensed over time onto the income statement.
