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Insurance expenses, which should include premiums paid for insurance policies that cover the business premises and/or the goods covered by the policy. As a rule, this item is initially taken up as a prepaid item upon acquisition and the related expense will be recognized at year end through the post closing adjusting entries. The principle of matching costs against revenues dictates that only the portion of the prepaid insurance incurred during the period will be recognized as deductible expenses against the reported income..