Accounting Treatment of LIC payments

Muralidharan (Self Employed) (1034 Points)

24 December 2010  

Dear Members

A person earning salary income is maintaining his personal accounts in Tally for the past several years. Maintaining accounts books is not mandatory for him as his annual income does not exceed Rs.3.00 lacs. On his own interest he is maintaining such account book in Tally.

He is paying LIC premium every year for four policies. The premium paid to LIC is being debted to "LIC premium account" which is under Investments. In other words he has treated the premium paid by him as his investment.

One of his policy is maturing during March 2011 and he is likely to get back the amount from LIC with accrued bonus...etc. He has so far paid Rs.45000/- as premium for the said policy. He is likely to get around Rs.75000/- on maturity. Kindly advise how to treat the difference of Rs.30000 (accrued bonus....etc) in his books of accounts. Whether it would be a capital receipt or revenue receipt. What entry he has to pass in his books of accounts on receipt of the payment from LIC

with regards