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How to Pass LIC Policy Premium Entry

I pay LIC policy premium through my savings account by ECS mode. My business accounts are through bank CC account. How do I pass entry of monthly premium of Rs. 10802/- ( premium for 15 policies). Which account is to be debited and credited? - Raghu


Prof. Vinod Kumar

First of all, you should know the basic concept of accounting. As per business entity concept, business is different from your personal identity. You can not mix your personal expenses with your business expenses. Because LIC is your personal expense, so, need not to pass any journal entry in your business book. Yes, if you do the insurance of your employees. Then, it will surely pass the journal entry in your business book with following way. LIC Policy of employee is your indirect expense and it is decrease in capital. Capital is the part of liability. So, decrease in the liability will be debit and bank balance is your asset. It has decreased. So, decrease in asset will be credit.

LIC of employee Account Debit Rs. 10,802

Bank Account Credit Rs. 10,802

If your saving accounting is your individual  business account. Then, if you are withdraw the money from it as personal use. Then it will be drawing of your capital. So, it will be debit and bank account credit.

Drawing Account ( Payment for LIC premium ) Account Debit Rs. 10,800

Bank Account Credit Rs. 10,800

If you want to learn all journal entries more deeply, please read our Journal Entries MADE Easy eBook.

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Accounting ! Answers: How to Pass LIC Policy Premium Entry
How to Pass LIC Policy Premium Entry
Accounting ! Answers
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