An Insurance Contract Is Classified as a Contract of Indemnity

question 35

True/False

An insurance contract is classified as a contract of indemnity because the insured is not supposed to profit from an insured loss; rather,the insured is meant to come out even.

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Definitions:

Periodic Method

An inventory accounting system where updates to inventory accounts and cost of goods sold are made periodically at the end of a reporting period.

Journal Entries

Recorded transactions in the accounting ledger that reflect the financial activities of a business.

Voucher

A document or record acting as evidence for a transaction, or as an authorization for payment.

Net Method

An accounting technique where discounts for early payment are calculated and recorded as lower sales prices at the time of sale, in anticipation that discounts will be taken.