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
Refer to the Consolidated Statements of Shareholders' Equity (pp. 62-63), Consolidated Statements of Cash Flow, including an abstract from Note 2, Cash Flow Information (pp. 61 and

Q. What is Bequest? Bequest - A gift by will of personal property. If bequest is money to the extent it's paid out ofincome from property it is taxable to the recipient. Normal

SECTION B QUESTION 2: Two companies Juk Ltd and Roop Ltd operate in the tourism sector. Financial forecasts are provided below: Income Statement for yea

Application of discharge Application may be made at any time after adjudication, but cannot be heard until the conclusion of the public examination. Notice of the hearing must

Q. Explain In the Money and Out of the Money option? In the Money option - Option granted with an exercise price below market price on grant date Out of the Money option - O

Illustration of Bankruptcy Njuguna Mwandawiro, carrying on a business as a trader in Likoni, Mombasa, finds himself insolvent, and on 15 August 1997 files his petition in bankr

depreciation in question is given more and in adjustment is less. What would be in the profit and loss account?

According to the Solow model, how would each of the following affect consumption per worker in the long run (i.e. in the steady state)? Draw a figure and explain. a. The destruc


In 200 words or more, discuss the issues that relate to the accounting for operating and capital leases. In your posting, please articulate issues that the accountant faces in r