Question

A large anticipated insurance recovery is reported as

A. an accrued amount
B. deferred revenue
C. an account receivable with additional disclosure explaining the nature of the contingency.
D. a disclosure only

Answer 1

An anticipated insurance recovery is reported as an account receivable with additional disclosure about the contingency. This reflects the entity's right to payment and ensures transparent reporting in financial statements.

Step-by-step explanation:

A large anticipated insurance recovery should be reported as C. an account receivable with additional disclosure explaining the nature of the contingency. This is because when an entity has a right to receive payment under an insurance policy due to a loss that has occurred, it creates an account receivable. Even if the payment is not yet received and there is a reasonable certainty of recovery, the amount can be recognized in the financial statements. Accounting standards often require that the nature of the contingency and the amount recognized be disclosed to ensure transparency and provide users of the financial statements with all the relevant information to understand the financial position of the entity.