Answer: The correct answers are A and B
Explanation: Both the income statement and the balance sheet would be misstated as at 31 March.
Prepaid insurance is a 12-month premium paid for insured assets, whose period has not expired.
A prepaid asset schedule is usually prepared and kept for monitoring and monthly amortization, if it is not automated. Normally at the end of each month, if the prepaid asset is not automated, the amortization charge entry is raised between prepaid asset and amortization charge by Debiting Amortization charge (expense) and Crediting Prepaid asset. With these adjusting entries, both the income statement and the balance sheet would be affected.
