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Investment vs capital account

Deepak (Others) (43 Points)

25 December 2015

in sole proprietor "Life insurance premium" is investment or drawings

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4 Replies

Ruchi (CA) (1410 Points)
Replied 26 December 2015

You can show it either ways.... it will not make much difference.

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Deepak (Others) (43 Points)
Replied 26 December 2015

thanks a lot ruchi....for your valuable suggestion .....insurance premium is owner investment or it will be treated as his drawings

Ruchi (CA) (1410 Points)
Replied 28 December 2015

As I said , you can treat it either ways. You can open an investment account and keep on debiting the insurance premium paid in that account. When the policy matures then you can credit the investment account and any surplus will be an addition to your capital. Or you can treat it as drawings year by year and on maturity the sums received will be added to capital. Some people prefer showing it as an investment in their balance sheet which helps to keep track of different policies and premiums paid against them and it also shows a good capital balance. While others show it as drawings for simplicity and ease.

Deepak (Others) (43 Points)
Replied 31 December 2015

in sole proprietor ..."fixed deposit" is shown under "investment" then any surplus that one received will come under "capital account or profit and loss income ledger"....???? what will be scenario the if we show "fixed deposit" under "capital account"..???

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