As an expense and an asset-survivorship policy, Financial Accounting

As an expense and an asset

This approach tries to resolve the differences between the two methods by ensuring that we show an asset that may materialize or crystallize and at the same time we charge an expense in the profit and loss for the premium.

A new account called life policy fund is normally set up to facilitate the process.

Relevant entries are:

   DR.    Life policy asset account
        CR.    Cash book

    DR.    Profit and loss
        CR.    Life policy fund account
    (With the premium paid for both of the two journal entries)


At the end of the financial period, the life policy asset account and fund account are normally adjusted to reflect the surrender value. The asset and fund account must be equal but directly opposite and incase the surrender value is higher than the premiums (total) paid to date are:-

    DR.    Life Policy asset account
        CR.    Life Policy fund account
        (With the difference)


When the insurance company pays the sum assured or surrendered value, then we:
    DR.    Cash book
        CR.    Life Policy asset account


The life policy fund account should be closed off to the partner’s capital accounts according to their profit sharing ratio.

Posted Date: 12/11/2012 6:31:29 AM | Location : United States







Related Discussions:- As an expense and an asset-survivorship policy, Assignment Help, Ask Question on As an expense and an asset-survivorship policy, Get Answer, Expert's Help, As an expense and an asset-survivorship policy Discussions

Write discussion on As an expense and an asset-survivorship policy
Your posts are moderated
Related Questions
RETAINED PROFITS BROUGHT FORWARD If we recall from the consolidated balance sheet, the group-retained profits should be made up of the holding companies retained profit plus the

Q. Risk and Return - issue of debt? Raising debt finance will raise the gearing and the financial risk of the company while raising equity finance will lower gearing and financ

Illustration of Admissions and Retirements Jim and Ken have been trading in partnership for several, sharing profits or losses equally after allowing for interest on their capi

SYSTEM ONE-THE HEAD OFFICE MAINTAINS ALL THE ACCOUNTS This system is suitable for an enterprise that has small branches (possibly in another area of the town or city where the

Calculating Present Value [LO1]  An investment will pay you $43,000 in 10 years.  If the appropriate discount rate is 7 percent compounded daily, what is the present value?

Write down what processes and data you would analyse when looking at the following scenarios and write down any improvements you could include to ensure that the problem would be l

I have this assignment. Is there a cost associated for help?

Determine the LIFO cost Toys "R" Us purchases inventory in crates of merchandise; each unit of inventory is a crate of toys. The fiscal year of Toys "R" Us ends each January 31

Troubled Debt Restructuring - Agreement between CREDITOR and DEBTOR which amends the terms of a DEBT which has little chance of being paid in accordance with its contractual terms.

A company purchased 16 million shares (representing an 80% controlling interest) in another company on 1 July 2010. The terms of the purchase were as follows:    1 share in