Treatment Of Lic premium

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This discussion explores the correct accounting treatment for LIC premiums paid by salaried individuals. While not mandatory, some prefer to record it. The consensus is that classifying LIC premiums under either 'investment' or 'capital' is acceptable. 'Investment' requires year-on-year tracking, whereas 'capital' is often preferred for simplicity as balances aren't carried forward. Alternatively, it can be treated as an expenditure, with accrual entries made for bonuses and other receivables.

Ayush Modi

Ayush Modi (Querist)

29 August 2020 I am a salaried person ( No business income)
and preparing my accounts on tally from past few years
i know its not compulsory but even though i do so

so i am paying lic premium
but i want to know that whether it should be shown under investment or under capital

what is correct accounting treatment
i want fundamentally correct answer sir and the logic behind it

dhiraj kabra

dhiraj kabra (Expert)

29 August 2020 Fundamentally both provisions/treatments are one and the same and allowed, investment u have to carry on years to years, that's why people generally show LIC premium paid in capital and don't carry the balances..!!

Aashok Kumar Sharma online

Aashok Kumar Sharma

(Expert)

31 August 2020 You can show it as an Expenditure and make accrual entry in the books of accounts for LIC Bonus and other receivable as per terms and conditions of the policy if you know the calculations.

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