I want to know is prepaid insurance is a current asset
Prepaid insurance is considered a current asset because you’ve already paid for a future benefit, but you’ll use that benefit up within a year (or the operating cycle, if it’s longer). Think of it like a gift card – you’ve got the money down, but you haven’t used it all yet, so it sits on your accounts as a current asset until you spend it down.
Key difference is as you use the prepaid insurance (like using up the gift card balance) the expense account goes UP (because you’re using the service) and the prepaid insurance account goes DOWN (because there’s less unused coverage left).
Makes sense now?
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