Chidinma runs a sole trader business and prepares accounts to 31 December annually. On 1 October 2023 she paid an annual insurance premium of ₦360,000 covering the period 1 October 2023 to 30 September 2024. Which of the following correctly states the insurance expense in the statement of profit or loss and the prepayment in the statement of financial position as at 31 December 2023?

The premium of ₦360,000 covers 12 months; the period from 1 October to 31 December 2023 is 3 months. Expense for the year = 3/12 × ₦360,000 = ₦90,000. The remaining 9 months (1 January to 30 September 2024) = 9/12 × ₦360,000 = ₦270,000 is a prepayment (current asset) at 31 December 2023. This accruals (matching) concept is fundamental to preparing sole trader final accounts under IAS 1.