Deal of The Day! Hurry Up, Grab the Special Discount - Save 25% - Ends In 00:00:00 Coupon code: SAVE25
Welcome to Pass4Success

- Free Preparation Discussions
Mail Us support@pass4success.com
Location US
Mob_nav_barsMENU

AGA GAFRB Exam - Topic 1 Question 6 Discussion

Actual exam question for AGA's GAFRB exam
Question #: 6
Topic #: 1
[All GAFRB Questions]

Using the cost recovery method of recognizing revenue, premiums are recognized as revenue

Show Suggested Answer Hide Answer
Suggested Answer: B

by Dominga at Jul 09, 2025, 01:28 AM

Limited Time Offer

25%

Off

Get Premium GAFRB Questions as Interactive Web-Based Practice Test or PDF

Contribute your Thoughts:

0/2000 characters
Submit Cancel
Kanisha
5 months ago
This aligns perfectly with the matching principle in accounting.
upvoted 0 times
...
Thaddeus
5 months ago
Wait, is it really only when costs are incurred? Sounds odd.
upvoted 0 times
...
Kerry
6 months ago
Totally agree, it makes sense to match revenue with costs!
upvoted 0 times
...
Keshia
6 months ago
So, does that mean no profit until claims are settled?
upvoted 0 times
...
Cordie
6 months ago
Premiums are recognized as revenue over the policy duration.
upvoted 0 times
...
Stacey
6 months ago
I practiced a similar question, and it was about recognizing revenue when the policy takes effect, but that doesn’t sound right for this method.
upvoted 0 times
...
Lauryn
7 months ago
I’m not entirely sure, but I feel like the answer has to do with matching revenue to expenses over time. B seems to fit that.
upvoted 0 times
...
Terrilyn
7 months ago
I remember something about recognizing premiums when received, but that seems more like cash basis accounting, right?
upvoted 0 times
...
Catarina
7 months ago
I think the cost recovery method means we recognize revenue as we incur costs, so I’m leaning towards B.
upvoted 0 times
...
Melynda
7 months ago
Nice, this is a good application of the cost recovery principle. I'm feeling confident about this one - the wording of the answers makes it pretty clear that B is the correct response.
upvoted 0 times
...
Jeannine
7 months ago
Okay, I think I've got it now. The key is that under the cost recovery method, revenue is recognized over the policy term, in proportion to the related costs like claims. So B is the right choice.
upvoted 0 times
...
Mitzie
7 months ago
Hmm, I'm a bit confused. I thought the cost recovery method meant revenue was only recognized once the full premium amount could be reasonably estimated. Let me re-read the question carefully.
upvoted 0 times
...
Luisa
8 months ago
This seems straightforward - the cost recovery method means revenue is recognized as costs are incurred, so B is the correct answer.
upvoted 0 times
...
Wade
10 months ago
Ah, the age-old dilemma of revenue recognition. B is the clear winner here - can't be recognizing profit before the work is done.
upvoted 0 times
...
Bette
10 months ago
That could lead to recognizing profit before related obligations are met, which goes against the principles of the cost recovery method.
upvoted 0 times
...
Margart
10 months ago
Haha, I can just imagine someone trying to claim all the revenue upfront. Nice try, but B is the way to go!
upvoted 0 times
Yan
8 months ago
Agreed, following the cost recovery method ensures no profit is recognized before obligations are met.
upvoted 0 times
...
Diane
8 months ago
Definitely, it's important to recognize revenue as claim costs are incurred to align with expenses.
upvoted 0 times
...
Barbra
9 months ago
I know right, trying to claim all the revenue upfront would be a risky move.
upvoted 0 times
...
...
Mary
10 months ago
Definitely B. Recognizing premiums as revenue when they're received seems too simplistic for insurance accounting.
upvoted 0 times
Helene
8 months ago
That's true, it's important to match revenue with the costs incurred to fulfill obligations.
upvoted 0 times
...
Merissa
9 months ago
It ensures that revenue aligns with expenses and no profit is recognized prematurely.
upvoted 0 times
...
Alisha
10 months ago
I agree, recognizing revenue throughout the duration of the policy makes more sense.
upvoted 0 times
...
...
Elouise
10 months ago
I'm not sure about this. Wouldn't it be better to recognize revenue when the premium is received?
upvoted 0 times
...
Mirta
10 months ago
I agree with you, Bette. It makes sense to recognize revenue as costs are recovered.
upvoted 0 times
...
Bette
11 months ago
I think the answer is B, throughout the duration of the policy when claim costs are incurred.
upvoted 0 times
...
Elbert
11 months ago
Hmm, I was leaning towards option A, but B makes more sense since revenue should align with expenses under the cost recovery method.
upvoted 0 times
Leoma
10 months ago
Yes, option B ensures that revenue is recognized throughout the duration of the policy in proportion to related costs.
upvoted 0 times
...
Leatha
11 months ago
It's important to recognize revenue as claim costs are incurred to ensure no profit is recognized before obligations are met.
upvoted 0 times
...
Reiko
11 months ago
Option A may seem logical, but option B is the correct choice to align revenue with expenses.
upvoted 0 times
...
...

Save Cancel