Insurance Companies Accounts

INSURANCE COMPANIES ACCOUNTS

LIFE INSURANCEGENERAL INSURANCE

1. LIFE INSURANCE: TYPES OF ISURANCE

CORPORATION GURANTEES TO PAY A CERTAIN SUM OF MONEY TO THE POLICY HOLDER ON REACHING A CERTAIN AGE OR DEATH WHICHEVER IS EARLIER.

2. GENERAL INSURANCE: OTHER TYPES OF INSURANCE EXCEPT LIFE INSURANCE; EX. FIRE,MARINE ,ACCIDENT,FIDELITY, THIRDPARTY AND CONSEQUENTIAL LOSS INSURANCE.

ACCOUNTS TWO TYPES OF BOOKS 1. STATUTORY BOOKS:

A. REGISTER OF POLICIESB. REGISTER OF CLAIMSC. THE REGISTER OF LICENCED INSURANCED

INSURANCE AGENTS2. SUBSIDIARY BOOKS

CASH BOOK, PREMIUM CASH BOOK, BRANCH CASH BOOK, PETTY CASH BOOK,CLAIM CASH BOOK, COMMISSON REGISTER, LAPSED AND CANCELED OLICIES BOOK, INVESTMENT LEDGER.

Annual accounts:form of revenue account of life insurance DEBIT SIDE1.CLAIM2.ANNUITY3.SURRENDER VALUE4.BONUS INCASH5. BONUS IN REDUCTION

OF PREMIUM6.EXPENSES OF MGT.7-9.BAD DEBTS,TAXESAND

OTHER EXP.10.LIFE ASSURANCE FUND

CREDIT SIDE1. LIFE ASSURANCE

FUND2. PREMIUM3. CONSIDERATION FOR

ANNUITIES GRANTED4. INTEREST, DIVIDEND

AND RENT5. REGISTRATION FEES6. REINSURANCE

1.CLAIMSALL CLAIMS INTIMATED AND

ACCEPTED+NOT ACCEPTED AT THE END+EXPENSES RELATING TO CLAIM- REINSURANCE RECOVERY

AMOUNT PAYABLE BY INSURANCE COMPANY

2.ANNUITIES IT IS AN EXPENSEANNUAL PAYMENTS BY INSURANCE

COMPANY TO THE PERSONS FOR A LUMP SUM RECEIVED SOME YEARS BACK

SURRENDER VALUE IF THE PREMIUM CAN NOT BE PAID ANY

MORE BY THE PERSON WHO HAD TAKEN INSURANCE THEN HE/SHE IS ALLOWED TO SURRENDER TO THE INSURANCE COMPANY AFTER THREE YEARS FROM THE DATE OF INSURANCE POLICY TAKEN. INSURANCE COMPANY PAYS A LUMP SUM BASED ON SOME CALCULATIONS. CALCULATION:SURRENDER-

REINSURANCE

BONUS IN CASHBONUS PAID TO THE POLICY

HOLDER BY THE INSURANCE COMPANY

CALCULATION:(BONUS IN CASH)MINUS(REINSURANCE FROM OTHER INSURANCE COMPANIES)

BONUS IN REDUCTION OF PREMIUM INSURANCE COMPANY MAY REDUCE

PREMIUM INSTEAD OF GIVING BONUS IN CASH TO THE POLICY HOLDER

METHODS:1. Bonus is an expense-debit revenue a/c

2. Add to the premium in the credit side with the premium

6.EXPENSES OF MANAGEMENT

They can be given either in the revenue account or a separate schedule can be prepared and the net amount can be shown in the revenue account

7-9. BAD DEBTS,TAXES AND OTHER EXPENDITURE

THEY ARE SHOWN SEPARATELY ON THE DEBIT SIDE OF THE REVENUE ACCOUNT

10.LIFE INSURANCE FUND

THE DIFFERENCE BETWEEN THE CREDIT SIDE AND THE DEBIT SIDE IS NOT PROFIT.

IT IS KNOWN AS LIFE ASSURANCE FUND

CREDIT SIDE1.LIFE ASSURANCE FUND:

THE BALANCE IN THE LAST YEAR REVENUE ACCOUNT CREDIT BALANCE

2. premium Premium received from policy holderADD: Premium yet to be received at the end BONUS IN REDUCTION OF PREMIUMLESS:OUTSTANDING PREMIUM AT THE

BEGINNINGPREMIUM PAID FOR REINSURANCE TO

OTHER INSURANCE COMPANIES

CONSIDERATION FOR ANNUITIES GRANTED

LUMPSUM RECEIVED BY INSURANCE COMPANY INORDER TO GIVE ANNUITIES IN FUTURE

IT IS AN INCOME

4. INTEREST DIVIDEND AND RENT RECEIVED /RECEIVABLE

DEDUCT: INCOME TAX PAID ON SUCH INCOME

REGISTRATION FEES

APPLICATION FORM FEES COLLECTED

AGENTS’ REGISTRATION FEES COLLECTED

INCOME

RE-INSURANCE ACCEPTED INSURANCE COMPANY ACCEPTS A

BUSINESS FROM OTHER COMPANIES AND RECEIVES PREMIUM THEN IT IS AN INCOME

IF COMPANY RE INSURANCE TO OTHER INSURANCE COMPANY IT PAYS PREMIUM THEN IT IS AN EXPENDITURE

BUT RECEIVES COMMISSION FOR GIVING BUSINESS TO OTHER COMPANIES THEN THE COMMISSION IS INCOME KNOWN AS COMMISSION ON REINSURANCE CEDED THEN IT IS INCOME

BALANCE SHEETLIABILITIES

1. SHARE CAPITAL2.RESERVE OR CONTINGENCY

ACCOUNTS3.BALANCE OF FUND ACCOUNT4. LOANS AND ADVANCES

BALANCE SHEET ASSETS

1.LOANS GIVEN TO OTHERS 2.INVESTMENTS IN GOVERNMENT SECURITIES,

SHARES IN OTHER COMPANIES 3.AGENTS’ BALANCES 4.OUTSTANDING PREMIUMS 5.INTEREST, DIVIDENDS AND RENT DUE BUT

NOT RECEIVED AT THE END OF THE YEAR 6.AMOUNTS DUE FROM OTHERS AND OTHER

INSURANCE COMPANIES FOR COMMISSION OR PREMIUM YET TO BE RECEIVED

LOSSTRANSFERRED TO P/L A/C

DEBIT SIDE CAN NOT BE MORE THAN THE CREDIT SIDE

EXERCISE-1 COMMISSION TO AGENTS? BONUS TO POLICY HOLDERS? CONSIDERATION FOR ANNUITIES? LIFE ASSURANCE FUND? RENT OUTSTANDING? BONUS UTILISED IN REDUCTION OF

PREMIUM? SURRENDERS?

EXERCISE 2 CLAIMS INTIMATED AND ADMITTED BUT

NOT YET PAID? CLAIMS INTIMATED BUT NOT ADMITTED? PROVISION FOR INCOME TAX? INCOME TAX PAID? CONSIDERATION FOR ANNUITIES

GRANTED? REGISTRATION FEES ? CONTINGENCY RESERVE?