Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

1. Introduction to Accounting

The Financial Statements

Financial Accounting

1. Introduction to Accounting

The Financial Statements

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Multiple Choice

Earned premiums are shown on an insurer's income statement because they are:

premiums that are expected to be earned in future periods

premiums that have not yet been received in cash

the total amount of premiums written during the accounting period

the portion of premiums that apply to the expired part of the policy period

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Verified step by step guidance

Understand the concept of 'earned premiums': Earned premiums represent the portion of insurance premiums that apply to the expired part of the policy period. This means the insurer has provided coverage for the time period and has 'earned' the premium for that coverage.

Distinguish earned premiums from other types of premiums: Unearned premiums are premiums received for coverage that has not yet been provided, while written premiums refer to the total amount of premiums recorded during the accounting period, regardless of whether they are earned or unearned.

Relate earned premiums to the income statement: Earned premiums are reported on the income statement because they represent revenue that the insurer has actually earned by providing coverage during the expired portion of the policy period.

Consider the timing of revenue recognition: In financial accounting, revenue is recognized when it is earned, not necessarily when cash is received. For insurers, this means recognizing earned premiums as revenue for the expired portion of the policy period.

Apply this understanding to the problem: The correct answer is 'the portion of premiums that apply to the expired part of the policy period,' because this aligns with the definition of earned premiums and the principles of revenue recognition in financial accounting.