Accounting of Insurance Business



Today, we teach you the accounting of insurance business. There are lots of businesses in insurance sector but today, we are just talking about independent insurance agent. In this business, you buy the insurance policy from insurance company at low price. After this, you sell same insurance policy to your customer at higher price. Difference between these will be your profit or earned commission. Following are its main steps:

1. When you buy insurance policy from insurance company on credit
Important learning point : When you buy insurance policy, it is your business product. You may buy motor insurance policy, fire insurance policy and workmen compensation policy etc. Following entry will be passed.

Insurance policy ( Name of policy ) account Dr. 100,000

Insurance company account Cr. 90,000

Commission earned account Cr. 10,000

2.  When you sell insurance policy to your customer at credit

Name of Customer account Dr. 1,00,000

Insurance policy ( Name of policy ) account Cr. 100,000

Record in Tally.ERP 9

If you want to record in computer, tally. ERP 9 is best accounting software for this.  Because in tally, we can easily deal lots of insurance policies as purchase and sale of any other product. We just create stock items in inventory info and the we can easily pass the voucher entry of purchase and sales. For purchase return, we will record it in debit note and for recording sales return, we will use credit note. All other expenses, assets and other expenses are record just like other normal business.

Vinod Kumar

Educator

Prof. Vinod Kumar is an Indian Educator, Motivational Speaker, Naturopathic Practitioner and Entrepreneur . He is the founder of Svtuition... read more »

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