Making insurance payments in advance is an example of:

a) An accrued revenue.

b) A prepaid expense.

c) An unearned revenue.

d) An accrued expense.

Answer: b) A prepaid expense.

The correct answer is prepaid expenses. Making insurance payments is considered an example of prepaid expenses. A sort of income that has been received or acquired but for which no cash payment has been made is known as accumulated revenue. Expenses that have been incurred but not recorded as expenses are known as accrued liabilities. Unearned revenue is compensation for goods or services that have not yet been delivered.