Recording Date: March 11, 2013

Intermediate (IPC) Course

Paper 5: Advanced Accounting

Chapter 5
Financial Statements of Insurance Companies

By CA SK Chhabra

© The Institute of Chartered Accountants of India 1

Disclaimer Statement

• This lecture has been delivered by faculty members to supplement the Study
Material, Practice Manual and other content
1

• The views expressed in this lecture are of the Faculty Member.

2

• The content of this video lecture has not been specifically discussed by the Council
of the Institute or any of its Committees and the views expressed herein may not be
3 taken to necessarily represent the views of the Council or any of its committees

© ICAI, 2013 2
Important Notes
The e-Lectures, PPT, Podcasts
and Video lectures on ICAI
Cloud Campus aim to
supplement the Study Material,
Practice Manual and
Supplementary Study Material
Due to changes in law, there is
likely to be some time gap
between these changes and the
recording of updated lectures.
© ICAI, 2013
This e-Lecture was Recorded on:
March 11, 2013
The lecture recordings are made
according to the syllabus and
laws existing/ applicable as on
the date of recording.
Hence, students are advised to
refer to the Study Material
including Supplementary Study
Material, if any, and other
relevant legislation for latest
provisions/ amendments
required for forthcoming
examination.
3
Learning Objectives

Types of Insurance businesses - General insurance, Life insurance

Some Important terms and Principles

Unexpired risk reserve

Types of General Insurance

Formats for different calculations

Valuation balance sheet and related concepts

Important Journal entries

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Introduction

Insurance Companies in India are governed by the

Insurance Companies Act 1938, other guidelines
given by the IRDA Act 1999 and IRDA Regulations
2002

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Types of Insurance Businesses
Insurance Business is basically of two types

General
Insurance Life
Insurance

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General Insurance

General Insurance means other than life insurance

This type of Insurance consists of Fire , Marine(Transport) and

Miscellaneous Insurance

Miscellaneous Insurance business consists of all types of Insurances

other than Marine and Fire. For example, Motor vehicle insurance and
Loss of profit policy

General insurance is done for the maximum for 1 year

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Important Terms

Reinsurance

• An arrangement under which the insurance company insures the whole or

part of the subject matter already insured by another insurance company

Insurance Policy

• It is the document issued by the insurance company containing terms of the

insurance contract. It specifies the losses that are covered by the policies and
also the maximum amount that can be paid in the event of loss

© ICAI, 2013 8
Important Terms 2

Premium
• The payment made by the insured to the insurance company in
consideration of the contract of insurance
Claims
• The claim arises only when loss occurs. Claim outstanding include
both claim intimated and accepted
Commission
• Commission is paid to the agent for getting insurance business. It is
an expense in Revenue Account

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Important Terms 3

Ceding company
• An insurance company that gives part of a risk it has assumed to another
insurance company(reinsurer). The ceding company pays premium and
receives commission from reinsurer

Bonus in reduction of premium

• General insurance policy can be renewed after the expiry of the policy. It is
added in net premium received and decreased as expense of equal amount

© ICAI, 2013 10
Important Terms 4

Accepting company
• An insurance company that accepts part of a risk which was
earlier insured by another insurance company

Unexpired risk reserve

• This reserve is created to meet the claim which may arise in
respect of the policies which may remain unexpired at year end

© ICAI, 2013 11
Unexpired Risk Reserve

Minimum requirement of reserve

• Fire insurance=50% of net premium

• Marine insurance=100% net premium
• Miscellaneous insurance=50% net premium

Company can maintain additional reserve along with the above reserve

• Unless otherwise stated the same amount of additional reserve as at the beginning of the
year, should be maintained at the end of year

© ICAI, 2013 12
Types of General insurance

Fire insurance
• Any policy taken to protect the party against financial loss of
goods or property due to fire
Marine insurance
• Any policy taken to protect the party against loss of ship or cargo

Miscellaneous insurance
• All policies of general insurance other than fire or marine policy

© ICAI, 2013 13
Formats for calculations

Premium Earned
• Direct business XX
• Add: Reinsurance accepted XX
• Less: Reinsurance ceded XX

Claims Incurred
• Direct business XX
• Add: claim on reinsurance accepted XX
• Less: claim on reinsurance ceded XX
• Add: Surveyor expenses XX
• Add: All other expenses related to claim XX

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Formats for calculations 2
Commission

Direct business XX
Add: On reinsurance accepted XX
Less: On reinsurance ceded XX

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Important Principles

Principle of Indemnity
• Insurance is a contract of indemnity. The insurer is called the indemnifier
and the insured is called indemnified
Insurable interest
• All and sundry cannot enter into contract of insurance.
• A cannot insure the life of B who is a total stranger
• But where B is a relative or debtor A has insurable interest and can
insure B’s life
Uberrimae fidei
• Contract of utmost good faith

© ICAI, 2013 16
Life Insurance

It covers the life risk of the insured person. In case

of death the nominee will get the insurance policy.

• The payment can be either on maturity of the

policy or may be in installments called annuity or
on death

© ICAI, 2013 17
Difference b/w Insurance and Assurance

Insurance
• Refers to providing cover for an event that might happen(fire,
theft, flood etc)

Assurance
• Is the provision of cover for an event that is certain to happen like
death and so life insurance is actually life assurance

© ICAI, 2013 18
Life Insurance Types
It is classified into 3 types

Whole life Assurance

• Policy amount is payable only at death of the policy holder

Term Assurance
• Policy amount is paid on maturity along with bonus or at the time of
death whichever is earlier

Annuity
• On maturity of the policy instead of making payment in lump sum
Amount is paid annually or monthly

© ICAI, 2013 19
Important terms

Paid up policy (only for life insurance)

• If an insured is unable To pay premium on his policy , he may discontinue
the policy and convert it into paid up policy
• Paid up value=No. of premiums paid X Sum assured/Total no. of premiums
payable

Surrender value
• When holder wishes to realize the amount of policy before expiry of period
, he surrender his right and he is paid an amount by a fixed formula

© ICAI, 2013 20
Important terms-2

Bonus
• Policy holders of with profit policies are entitled to receive bonus at the declared rate
• In cash
• Bonus in reduction of premium
• Reversionary bonus on maturity

Interim bonus
• It is a bonus declared between two dates of valuation balance sheet

© ICAI, 2013 21
Important terms-3

Consideration for annuities granted

• It refers to the lump sum amount paid to the insurer as
consideration for the payment of annuities. It is an income of life
insurance business

Life assurance fund

• It refers to the fund which is retained to meet the aggregate
liability on all policies outstanding
• A life insurance business is said to have earned profit only if its life
assurance fund exceeds its net liability on all outstanding policies

© ICAI, 2013 22
Valuation Balance sheet and Related
concepts

For the purpose of ascertaining profit or losses of

a life insurance company, a valuation balance
sheet is prepared once in every two years

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Format of Valuation Balance sheet

Particulars Rs Particulars Rs

To Net liability XX By life insurance fund XX

balance as on date

To Surplus XX

XX XX

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Valuation Balance sheet and Related
concepts Continued

Disposal of surplus
• 95% of surplus for policy holders
• 5% of surplus for shareholders

Net liability
• As per Acturial valuation , it is the excess of the expected future
liability on all outstanding policies over the premium payable/paid
by the insured

© ICAI, 2013 25
Statement showing calculation of Net profit

Surplus as per valuation balance sheet

XX

Add:Interim bonus XX

Less:Expenses to be written off XX

Less:Provision for tax XX

Surplus after tax XX

XX
Less:Surplus at the beginning of period

Net profit for the valuation period XX

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© ICAI, 2013
Statement showing distribution of Surplus

Total surplus after tax(after adding interim bonus) XX

Less:Surplus to be carried forward XX

Surplus available for distribution XX

Share of shareholders at 5% XX

Share of policy holders at 95% XX

Less:Interim bonus paid XX

Amount due to policy holders XX

© ICAI, 2013 27
Journal entries

 For transfer of total profit as per valuation balance sheet

Life assurance fund A/c Dr

To Profit and loss A/c

 For tax provision

Profit and loss A/c Dr
To provision for tax A/c

© ICAI, 2013 28
Journal entries Continued

 For bonus payable in cash

Profit and loss A/c Dr
To Bonus payable in cash

 For Reversionary Bonus

Profit and loss A/c Dr
To Life assurance fund

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Journal entries Continued

 For making reserve for unexpired risk(In general

insurance)
Revenue A/c Dr
To Reserve for unexpired risk

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Format for Revenue Account
From B – RA
Name of the Insurance Company
Revenue Account for the year ended…

Particulars Schedule Current Year

Premiums earned 1 XX
Change in provision for unexpired risk XX
Other Income(profit on sale of asset etc) XX
Interest, dividend and rent(gross) XX

Total (A) XX
Claims Incurred 2 XX

Commission 3 XX
Operating Expenses for Insurance Business 4 XX

Total (B) XX

Operating Profit/ (Loss) from

Fire/ Marine/Miscellaneous Business (A) – (B) A-B XX

31
© ICAI, 2013
Format For Profit and Loss A/c
Form B – PL
Name of the Company
Profit and Loss Account for the year ended…

Amount
Particulars

1. Operating Profit/(Loss) from

(a) Fire Insurance XX

(b) Marine Insurance XX

(c) Miscellaneous Insurance XX

2. Income from Investments(Gross) XX

3. Other Income XX
Total (A) XX
4. Provision ( To be specified)
For diminution in the value of investment XX
Other XX
5.Other expenses(like director fees etc) XX
Total (B) XX
Profit before tax (A) – (B) XX
32
© ICAI, 2013
Format of P&L Continued
Form B – PL
Name of the Company
Profit and Loss Account for the year ended…

Particulars Amount

Profit before tax(From last slide) XX

Less: Provision for tax XX
Profit after tax XX
Less: Catastrophe Reserve XX

Profit available for appropriations XX

Less: Appropriations
Interim dividends paid during the year XX
Proposed final dividend XX
Balance net profit for the Current year XX
Balance of profit carried forward from last year XX
Balance of Profit carried to balance sheet XX
33
© ICAI, 2013
 Practical Problems

34
© ICAI, 2013
Illustration 1

Comprehensive Problem
Nov 1999

35
© ICAI, 2013
Problem Statement
From the following figures appearing in the books of Fire Insurance division of a
General Insurance Company, show the amount of claim as it would appear in the
Revenue Account for the year ended 31st March, 2012 :
Direct Business Re-insurance
Rs. Rs.
Claims paid during the year 46,70,000 7,00,000
Claims Payable - 1st April, 2011 7,63,000 87,000
31st March, 2012 8,12,000 53,000
Claims Received -- 2,30,000
Claims Receivable -1st April, 2011 -- 65,000
31st March, 2012 -- 1,13,000
Expenses of Management 2,30,000 --
(includes Rs.35,000 surveyor’s fee and
Rs.45,000 Legal expenses for settlement of claims)

© ICAI, 2013 36
Working Notes for Problem

Direct Reinsurance Reinsurance

Business Accepted Ceded

Claims Received 4670000 700000 230000

Less: Claims outstanding on 1 April 2011 763000 87000 65000

Add: Claims oustanding on 31 March

2012 812000 53000 113000

Total 4719000 666000 278000

© ICAI, 2013
37
Solution 1
General Insurance Company
Fire Revenue Account (For the year ended 31st March 2012)

Amount Amount
Particulars

Claims Due Direct Business 4719000

Add: Claims on business accepted 666000

Less: claims on business ceded (278000)

Add: Legal expenses for settlement of 35000

claims
5187000

© ICAI, 2013
38
 Illustration 2

Comprehensive Problem
Nov 2000

39
© ICAI, 2013
Problem Statement
You are required to prepare Revenue Accounts in respect of Fire and Marine Insurance business
for the year ended 31.03.2000 and a Profit and Loss Account for the same period for Perfect
General Insurance Company Limited :
Rs. Rs.
Directors’ Fees 80,000 Interest received 19,000
Dividend received 1,00,000 Fixed Assets (01.04.1999) 90,000
Provision for Taxation Income-tax paid during
(as on 01.04.1999) 85,000 the year 60,000

Fire Marine
Rs. Rs.
Outstanding Claims on 01.04.1999 28,000 7,000
Claims paid 1,00,000 80,000
Reserve for Unexpired Risk on 01.04.1999 2,00,000 1,40,000
Premiums Received 4,50,000 3,30,000
Agent’s Commission 40,000 20,000
Expenses of Management 60,000 45,000
Reinsurance Premium (Dr.) 25,000 15,000

© ICAI, 2013 40
Problem Statement Continued
The following additional points are also to be taken into account :

Depreciation on Fixed Assets to be provided at 10% p.a.

Interest accrued on investments Rs.10,000.

Closing provision for taxation on 31.03.2000 to be maintained at Rs.1,24,138.

Claims outstanding on 31.3.2000 were Fire Insurance Rs.10,000; Marine Insurance Rs.15,000.

Premium outstanding on 31.3.2000 were Fire Insurance Rs.30,000; Marine Insurance Rs.20,000.

Reserve for unexpired risk to be maintained at 50% and 100% of net premiums in respect of Fire
and Marine Insurance respectively.

Expenses of management due on 31.3.2000 were Rs.10,000 for Fire Insurance and Rs.5,000 in
respect of Marine Insurance

© ICAI, 2013 41
Working Notes for Problem

Fire Marine

Claims under policies re-insurance

Claims paid during the year 100000 80000

Add : Outstanding on 31st March, 2000 10000 15000

Less: Outstanding on 1st April, 1999 (28000) (7000)

82000 88000
Expenses of management

Expenses paid during the year 60000 45000

Add : Outstanding on 31st March, 2000 10000 5000

70000 50000

42
© ICAI, 2013
Working Notes for Problem Cont

 Calculation of provision for tax for year ending 31-03-2000

 1. Tax paid during the year 60,000
 Less: Opening provision (85,000)
 Add: Closing provision 1,24,138
 Provision for current year 99,138
 Calculation of Unexpired Risk Reserve
 Fire Marine
 Opening 200000 140000
 Less: Closing (227500) (335000)
 Increase in reserve required (27500) (195000)

© ICAI, 2013 43
Solution 2
Form B – RA
Perfect General Insurance Co. Ltd
Revenue Account for the year ended 31st March, 2000

Particulars Fire Insurance Marine insurance

1. Premiums earned 455000 335000

2. Other income Nil Nil
3. Change in provision for unexpired risk (27500) (195000)
4. Interest, Dividend and Rent – Gross Nil Nil
Total (A) 427500 140000
5.Claims Incurred 82000 88000

6.Commission 40000 20000

7.Operating Expenses for Business 70000 50000

8. Other Expenses Nil Nil
Total (B) 192000 158000
Operating Profit/ (Loss) from
Fire/ Marine/Miscellaneous Business (A) – (B) 235500 (18000)

© ICAI, 2013 44
Solution 2 Continued
Form B – PL
Perfect General Insurance Co. Ltd
Profit and Loss Account for the year ended 31st March, 2000

Particulars Amount in 000s

1. Operating Profit/(Loss) from

(a) Fire Insurance 235500

(b) Marine Insurance (18000)

(c) Miscellaneous Insurance Nil

2. Income from Investments 119000

3. Other Income 10000

Total (A) 346500
4. Provision ( Other than taxation) Nil
5. Other Expenses (Director’s fees, Depreciation on 89000
F.A.)
Total (B) 89000

Profit Before Tax (A –B) 257500

Profit After Tax(After Provision of 99138) 158362

45
© ICAI, 2013
Solution 2 Continued
Annexure

Particulars Fire Insurance Marine insurance

Premiums earned Schedule 1

Premium 450000 330000
Less: Reinsurance (Dr) (25000) (15000)
Add:Outstanding closing 30000 20000

Claims Incurred Schedule 2

Claims 100000 80000

Less:Outstanding opening (28000) (7000)

Add: Outstanding closing 10000 15000

Commission Schedule 3
Agent Commission 40000 20000

46
© ICAI, 2013
 Illustration 3

Comprehensive Problem
Nov 2006

© ICAI, 2013 47
Problem Statement
X Fire Insurance Co. Ltd. commenced its business on 01.04.2005. It submits you the following
information for the year ended 31.03.2006
 Rs.
 Premium received 15,00,000
 Re-insurance premium paid 1,00,000
 Claims paid 7,00,000
 Expenses of Management 3,00,000
 Commission paid 50,000
 Claims outstanding on 31.03.2006 1,00,000
 Create reserve for unexpired risk @ 40%
 Prepare Revenue Account for the year ended 31.03.2006.

© ICAI, 2013 48
Solution 3
Form B – RA
Perfect General Insurance Co. Ltd
Revenue Account for the year ended 31st March, 2000

Particulars Schedule Current Year

1. Premiums earned 1 1400000

2. Change in reserve for unexpired risk(0- 560000
560000) i.e 40% of 1400000

Total (A) 840000

3.Claims Incurred 2 800000

4.Commission 3 50000
5.Operating Expenses for Insurance Business 4 300000

Total (B) 1150000

Operating Profit/ (Loss) from

Fire/ Marine/Miscellaneous Business (A) – (B) A-B (310000)
49
© ICAI, 2013
Solution 3 Continued
Annexure

Particulars Amount

Schedule 1
Premium Received 1500000
Less:Reinsurance (100000)
Total 1400000

Schedule 2
Claims paid 700000

Add:Outstanding closing 100000

Total 800000

Schedule 3
Commission paid 50000

50
© ICAI, 2013
Solution 3 Continued
Annexure

Particulars Amount

Schedule 4
Expenses of management 300000

51
© ICAI, 2013
 Illustration 4

Comprehensive Problem
May 1998

© ICAI, 2013 52
Problem Statement
 Mohan Insurance Co. Ltd. Furnishes you with the following information:
 On 31.12.2011, it had reserve for unexpired risks to the tune of Rs. 40 crores. It comprised
of Rs. 15 crores in respect of marine insurance business; Rs. 20 crores in respect of life
insurance business and Rs. 5 crores in respect of miscellaneous insurance business.
 It is the practice of Indian Insurance Co. Ltd. to create reserves at 100% of net premium
income in respect of marine policies and at 50% of net premium income in respect of fire
and miscellaneous income policies.
 During 2012, the following business was conducted (Rs in crores)
 Marine Fire Miscellaneous
 Rs Rs Rs
 Premium collected from:
 (a) Insured in respect of policies issued 18 43 12
 (b) Other insurance companies in respect
 of risks undertaken 7 5 4
 Premium paid/payable to other insurance
 companies on business ceded 6.7 4.3 7

© ICAI, 2013 53
Problem Statement Continued

Indian Insurance Co. Ltd. asks you to:

(a)Pass journal entries relating to “Unexpired risks reserve”.

(b)Show in columnar form “Unexpired risks reserve” a/c for 2012.

© ICAI, 2013 54
Solution 4

Particulars Debit Credit

Marine revenue A/c Dr 3.3

To Unexpired Risks Reserve A/c 3.3
(Being the difference between closing provision of Rs. 18.30
crores (18+7-6.7) and opening provision of Rs. 15 crores
charged to marine revenue account

Fire Revenue A/c Dr 1.85

To Unexpired Risks Reserve A/c 1.85
(Being the difference between closing Provision of Rs. 21.85
crores [(43+5-4.3)/2]and opening provision of Rs. 20 crores
charged to fire revenue account)

Unexpired Risks Reserve A/c Dr 0.5

To Miscellaneous Revenue A/c 0.5
(Being the excess of opening balance of Rs. 5 crores over the
required closing balance of Rs. 4.5crores [(12+4-7)/2)] credited
to miscellaneous revenue account.)

© ICAI, 2013
55
Solution 4 Continued

Unexpired Risk Reserve A/c(Rs in crores)

Particulars Marine Fire Misc. Particulars Marine Fire Misc.

To Revenue A/c 0.5 By balance b/d 15 20 5

To Balance c/d 18.3 21.85 4.5 By Revenue A/c 3.3 1.85

18.3 21.85 5 18.3 21.85 5

© ICAI, 2013 56
 Illustration 5

Comprehensive Problem
Nov 2002

© ICAI, 2013 57
Problem Statement
Prepare the Revenue Accounts of Sagar Bhima Co. Ltd. engaged in Marine Insurance Business for year
ended 31.3.2002
Particulars Direct Business Re-Insurance
(Rs.) (Rs.)
I. Premium :
Received 24,00,000 3,60,000
Receivable -1st April, 2001 1,20,000 21,000
-31st March, 2002 1,80,000 28,000
Premium paid -- 2,40,000
Payable -1st April, 2001 -- 20,000
-31st March, 2002 -- 42,000
II. Claims :
Paid 16,50,000 1,25,000
Payable -1st April, 2001 95,000 13,000
-31st March, 2002 1,75,000 22,000
Received -- 1,00,000
Receivable -1st April, 2001 -- 9,000
-31st March, 2002 -- 12,000
III. Commission:
On Insurance accepted 1,50,000 11,000
On Insurance ceded -- 14,000

© ICAI, 2013 58
Problem Statement Continued
Other expenses and income:

Rent, Rates and Taxes – Printing and Stationery Foreign Tax paid -
Salaries - Rs.2, 60,000
Rs18, 000 - Rs.23, 000 Rs.2, 40,000

Legal Expenses
Interest, Dividend and (Inclusive of Rs.20,000
Income Tax deducted at
Rent received (net) - in connection with the Bad Debts - Rs.5,000
source - Rs.24,500
Rs.1, 15,500 settlement of claims) -
Rs.60,000

Balance of Fund on 1st

April, 2001 was
Rs.26,50,000 including
Double Income Tax
Additional Reserve of
refund - Rs.12,000;
Rs.3,25,000. Additional
Profit on Sale of Motor
Reserve has to be
Car Rs.5,000.
maintained at 5% of the
net premium of the
year.
© ICAI, 2013 59
Solution 5
Form B –RA ( Prescribed by IRDA)
Revenue Account for the year ended 31st March, 2002
Marine Insurance Business

Particulars Sch Marine Insurance

1. Premiums earned 1 2565000

2. Other income(Double Income tax refund and Profit on sale of car) 17000
3. Change in provision for unexpired risk(2693250–2650000) (43250)
4. Interest, Dividend and Rent –Gross (115500+24500) 140000
Total (A) 2678750
5.Claims Incurred(net) 2 1781000
6.Commission 3 147000
7.Operating Expenses for Insurance Business 4 341000
8. Other Expenses(Bad debts and foreign taxes) 245000
Total (B) 2514000

Operating Profit from Marine Business (A) – (B) 164750

© ICAI, 2013 60
Solution 5 Continued
Annexure

Particulars Amount

Schedule 1
Premium Received 2627000
Less:Reinsurance (262000)
Total 2565000

Schedule 2
Claims incurred 1781000

Schedule 3
Commission paid 150000
Add:Reinsurance accepted 11000
Less:Reinsurance ceded (14000)
147000

© ICAI, 2013 61
Solution 5 Continued
Annexure

Particulars Amount

Schedule 4
Employee remuneration and benefits 260000
Rents rates and taxes 18000
Printing and stationary 23000
Legal and Professional charges 40000

Total 341000

© ICAI, 2013 62
 Illustration 6

Comprehensive Problem

© ICAI, 2013 63
Problem Statement
 The life fund of a Sri Krishna Life Assurance Company was Rs.
86,48,000 as on 31st March, 2012
 The interim bonus paid during the inter valuation period was
Rs. 1,48,000. The periodical actuarial valuation determined the
net liability at Rs 74,25,000
 Surplus brought forward from the previous valuation was Rs
8,50,000
 The directors of the company proposed to carry forward Rs.
9,31,000
 Show:
 (a) the valuation balance sheet
 (b) the net profit for the valuation period; and
 (c) the distribution of surplus

© ICAI, 2013 64
Solution 6:Valuation Balance sheet

Particulars Rs Particulars Rs

To Net liability 7425000 By life insurance fund 8648000

balance as on date

To Surplus 1223000

8648000 8648000

65
© ICAI, 2013
Solution 6:Statement showing calculation of
Net profit
Surplus as per valuation balance sheet 1223000

Add:Interim bonus 148000

Less:Expenses to be written off Nil

Less:Provision for tax Nil

Surplus after tax 1371000

Less:Surplus at the beginning of period 850000

Net profit for the valuation period 521000

© ICAI, 2013
Solution 6:Statement showing distribution of
Surplus
Total surplus after tax 1371000

Less:Surplus to be carried forward 931000

Surplus available for distribution 440000

Share of shareholders at 5% 22000

Share of policy holders at 95% 418000

Less:Interim bonus paid 148000

Amount due to policy holders 292000

67
© ICAI, 2013
 Illustration 7

Comprehensive Problem
Nov 1995

68
© ICAI, 2013
Problem Statement
 The following balances are extracted from the books of Gopal Life
Insurance Corporation

 Life Insurance Fund (as on 31.3.2012) 1,600 lakhs

 Net Liabilities as per Valuation 1,200 lakhs

 Interim Bonus Paid 150 lakhs

 You are required to show:

 (a) The valuation Balance Sheet as on 31.3.2012

 (b) The distribution statement

© ICAI, 2013 69
 Solution 7:Valuation Balance sheet

Particulars Rs (lakhs) Particulars Rs(lakhs)

To Net liability 1200 By life insurance fund 1600

balance as on date

To Surplus 400

1600 1600

70
© ICAI, 2013
Solution 7:Statement showing distribution of
Surplus
Surplus as per Valuation statement 400

Add: Interim Bonus 150

Surplus available for distribution 550

Share of shareholders at 5% 27.5

Share of policy holders at 95% 522.5

Less:Interim bonus paid 150

Amount due to policy holders 372.5

© ICAI, 2013 71
 Thank You

© ICAI, 2013 72