Treatment of insurance premium.
This query is : Resolved
kamal kishore
(Querist)
16 October 2012
why insurance premium paid is treated as an expense item in accounting, despite it is received back after the policy is matured?
CA Satish Badve
(Expert)
16 October 2012
Insurance Premium for Stocks, business assets only treated expenses item . This type of insurance only covers the risk of loss of business asset. No amount is received back after the term is over. In case of LIC where the premium is received back is an personal insurance and hence debited to capital account as drawings and not debited to business expenses.
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kamal kishore
(Querist)
18 October 2012
It is a satisfactory answer.
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