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

Types of Accounting

Financial Accounting

1. Introduction to Accounting

Types of Accounting

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Multiple Choice

Which type of accounting refers to the dividend option in which the policy owner uses dividends to purchase additional insurance coverage?

Cash surrender accounting

Paid-up additions

Premium reduction

Participating accounting

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Verified step by step guidance

Understand the context of the question: The problem is asking about a specific type of accounting or financial mechanism related to dividends in insurance policies.

Clarify the term 'dividends' in this context: In insurance, dividends are a return of excess premium paid by policyholders of participating policies. These dividends can be used in various ways, such as cash withdrawal, premium reduction, or purchasing additional insurance coverage.

Focus on the option 'Paid-up additions': This refers to using dividends to purchase additional amounts of insurance coverage without requiring further premium payments. These additions are fully paid-up and increase the policy's death benefit and cash value.

Eliminate other options: 'Cash surrender accounting' refers to the process of surrendering a policy for its cash value, which is unrelated to using dividends. 'Premium reduction' involves using dividends to lower future premium payments, and 'Participating accounting' refers to the accounting for policies that pay dividends, not the specific use of dividends.

Conclude that the correct answer is 'Paid-up additions,' as it directly describes the use of dividends to purchase additional insurance coverage.