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An entity has obtained insurance cover from its sister concern but advance premium has not been paid. What will be accounting entry to record the transaction. Associated risk cover has been made availble to the Insured Company which is not payment dependant.
Since an agreement is made between the two, regardless of the payment, the insured company will charge the premium to profit and loss and record a liability for the same amount.
Entry
Premium for the year (Dr.)
Insurance Payable (Cr.)
An entity has obtained insurance cover from its sister concern but advance premium has not been paid. What will be accounting entry to record the transaction. Associated risk cover has been made availble to the Insured Company which is not payment dependant.
Every month accounting entry to record the transaction will be:
Debit Insurance Expenses and Credit Accounts Payable Sister Company.
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