LIC Query
This query is : Resolved
27 February 2011
LIC is my current investment and i think it shud shown in yearly balance sheet bt am nt sure...plz ezplain
and at wat amount shud i show it ?
sum assured ?
if yes then wat abt premium ?
and same as in case of RD...at wat amt shud i show in yearly balance sheet ?
and at wat amount shud i show it ?
sum assured ?
if yes then wat abt premium ?
and same as in case of RD...at wat amt shud i show in yearly balance sheet ?
28 February 2011
If you are having LIC Mutual Fund investment , you may show the same as Investment in your balance sheet.
However, regular premium payable to LIC are directly debited to Capital Account and are generally not shown in the balance sheet.
In case of RD , you may show the amount deposited in the Balance Sheet if yet not shown as such. In the earlier years if the payments made towards RD A/c has been debited to Capital Account, reverse entry may be passed by Debiting RD A/c and crediting the Capital Account.
However, regular premium payable to LIC are directly debited to Capital Account and are generally not shown in the balance sheet.
In case of RD , you may show the amount deposited in the Balance Sheet if yet not shown as such. In the earlier years if the payments made towards RD A/c has been debited to Capital Account, reverse entry may be passed by Debiting RD A/c and crediting the Capital Account.
01 March 2011
my question is ...an assessee is paying premium on LIC policy its not mutual fund..its insuarance policy...hw can the assessee show it in balance sheet ?
02 August 2024
### **Reporting LIC Policies and Recurring Deposits in Financial Statements**
#### **1. LIC Policies**
When it comes to reporting Life Insurance Corporation (LIC) policies in the financial statements, the approach depends on the nature of the investment and the purpose of the policy. Here's how to handle LIC policies in your balance sheet:
**a. **Investment in LIC Policies:**
- **Investment Value**: Generally, LIC policies are not shown in the balance sheet at their "sum assured" amount. Instead, they are recorded at the amount of premiums paid (if considering them as an investment) or as part of the asset if they are of investment nature.
- **Premium Payments**: Premiums paid are typically treated as expenses in the Profit & Loss Account rather than assets in the balance sheet. This is because premiums represent an outflow of funds to maintain the insurance coverage.
**b. **Keyman Insurance Policies:**
- **Investment Nature**: If the LIC policy is a Keyman Insurance policy (taken on key employees), it should be treated differently. The premiums are treated as a business expense in the Profit & Loss Account.
- **Balance Sheet Treatment**: Keyman Insurance policies are not generally listed as assets in the balance sheet. However, any accumulated value (if applicable) might be considered in specific circumstances.
**c. **For Tax and Accounting Purposes:**
- **Expenditure Treatment**: Premiums paid on LIC policies are considered business expenses and should be recorded in the Profit & Loss Account under “Insurance Premium” or “Employee Benefits” (if related to employees).
- **Balance Sheet Inclusion**: LIC policies themselves are not typically listed as assets in the balance sheet unless there is a specific accumulated amount or surrender value which might be relevant in certain accounting treatments.
#### **2. Recurring Deposits (RD)**
**a. **Investment in Recurring Deposits:**
- **Amount to Show**: Recurring Deposits (RD) are treated as a form of investment. In the balance sheet, you should record the amount you have invested in RD accounts. This is generally shown under “Investments” or “Current Assets” based on liquidity.
- **Interest Earned**: Any interest accrued on RD should be recognized in the Profit & Loss Account as “Interest Income.”
**b. **Balance Sheet Inclusion:**
- **Current Asset**: RD amounts are shown as a current asset on the balance sheet. They reflect the total amount deposited minus any withdrawals made up to the reporting date.
- **Interest Accrual**: Interest that has accrued but not yet received should be recorded under “Accrued Income” or “Interest Receivable.”
**c. **Tax Considerations:**
- **Interest Income**: Interest earned on RD is taxable and should be declared as income in the financial statements.
#### **Summary**
- **LIC Policies**: Premiums paid are treated as expenses in the Profit & Loss Account. LIC policies are generally not listed as assets in the balance sheet unless there is a specific reason to include accumulated value or surrender value.
- **Recurring Deposits (RD)**: Show the total deposited amount as a current asset in the balance sheet. Interest earned is recorded as income in the Profit & Loss Account.
For precise and detailed accounting treatment, it is advisable to consult with a financial advisor or accountant familiar with your specific circumstances and applicable accounting standards.
#### **1. LIC Policies**
When it comes to reporting Life Insurance Corporation (LIC) policies in the financial statements, the approach depends on the nature of the investment and the purpose of the policy. Here's how to handle LIC policies in your balance sheet:
**a. **Investment in LIC Policies:**
- **Investment Value**: Generally, LIC policies are not shown in the balance sheet at their "sum assured" amount. Instead, they are recorded at the amount of premiums paid (if considering them as an investment) or as part of the asset if they are of investment nature.
- **Premium Payments**: Premiums paid are typically treated as expenses in the Profit & Loss Account rather than assets in the balance sheet. This is because premiums represent an outflow of funds to maintain the insurance coverage.
**b. **Keyman Insurance Policies:**
- **Investment Nature**: If the LIC policy is a Keyman Insurance policy (taken on key employees), it should be treated differently. The premiums are treated as a business expense in the Profit & Loss Account.
- **Balance Sheet Treatment**: Keyman Insurance policies are not generally listed as assets in the balance sheet. However, any accumulated value (if applicable) might be considered in specific circumstances.
**c. **For Tax and Accounting Purposes:**
- **Expenditure Treatment**: Premiums paid on LIC policies are considered business expenses and should be recorded in the Profit & Loss Account under “Insurance Premium” or “Employee Benefits” (if related to employees).
- **Balance Sheet Inclusion**: LIC policies themselves are not typically listed as assets in the balance sheet unless there is a specific accumulated amount or surrender value which might be relevant in certain accounting treatments.
#### **2. Recurring Deposits (RD)**
**a. **Investment in Recurring Deposits:**
- **Amount to Show**: Recurring Deposits (RD) are treated as a form of investment. In the balance sheet, you should record the amount you have invested in RD accounts. This is generally shown under “Investments” or “Current Assets” based on liquidity.
- **Interest Earned**: Any interest accrued on RD should be recognized in the Profit & Loss Account as “Interest Income.”
**b. **Balance Sheet Inclusion:**
- **Current Asset**: RD amounts are shown as a current asset on the balance sheet. They reflect the total amount deposited minus any withdrawals made up to the reporting date.
- **Interest Accrual**: Interest that has accrued but not yet received should be recorded under “Accrued Income” or “Interest Receivable.”
**c. **Tax Considerations:**
- **Interest Income**: Interest earned on RD is taxable and should be declared as income in the financial statements.
#### **Summary**
- **LIC Policies**: Premiums paid are treated as expenses in the Profit & Loss Account. LIC policies are generally not listed as assets in the balance sheet unless there is a specific reason to include accumulated value or surrender value.
- **Recurring Deposits (RD)**: Show the total deposited amount as a current asset in the balance sheet. Interest earned is recorded as income in the Profit & Loss Account.
For precise and detailed accounting treatment, it is advisable to consult with a financial advisor or accountant familiar with your specific circumstances and applicable accounting standards.
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