Problems on General Insurance Companies Accounts

Problem 8

From the following balances of Oriental Insurance Company Limited as on 31.03.2017 prepare: Fire revenue account,
Marine revenue account, Profit and loss account

Particulars Fire Marine

Bad debts 10,000 24,000
Reserve (as on 1.4.2016) 5,00,000 16,40,000
Claims paid and o/s 3,80,000 7,60,000
Commission paid 1,80,000 216000
Additional reserve (as on 1.4.2016) 1,00,000 -
Premium less reinsurance 1200,000 21,60,000
Management expenses 2,90,000 8,00,000
Commission on reinsurance ceded 60,000 120,000

Auditors fees 6,000

Directors fees 6,400
Share transfer fees 1,600
Bad debts recovered 2,400
Depreciation 70,000
Interest and dividend received 28,000
Difference in exchange (Cr) 600
Miscellaneous receipts 10,000
Profit on sale of land 1,20,000
In addition to the usual reserve, an additional reserve in case of fire insurance is to be increased by 5% of net
premium.

Problem 9:

The following balances are extracted from the books of zenith General Insurance co as on 31.03.2017

Particulars Fire Marine

Claims paid 2,00,000 1,74,000
Premium less reinsurance 7,48,000 5,94,000
Commission on reinsurance ceded 26,000 -
Commission paid 1,24,000 1,02,000
Management expenses 1,72,000 1,36,000
Reserve(as on 1.4.2016) 4,20,000 20,000
Additional reserve (1.4.2016) 4,20,000 4,80,000
Claims outstanding (1.4.2016) 1,20,000 20,000
Premium outstanding (1.4.2016) 48,000 22,000
Depreciation on assets Rs72,000
Loss on sale of investments Rs16,000
Audit fees Rs26,000
Directors fees Rs72,000
Interest and dividends on investments RS1,26,000
Additional information:

a. Premium outstanding on 31.03.2017

Fire=Rs60,000 marine= Rs30,000
b. Claims outstanding on 31.03.2017
Fire Rs92,000 marine= Rs34,000
 c. Reserve for unexpired risks to be maintained at 50% and 100% of net premium of fire and marine insurance
respectively
d. Additional reserve for fire to be kept at 20% of net premium. Prepare fire revenue account, marine revenue
account and profit/ loss account.

Problem 10:

From the following balances as on 31.03.2017 in the books of General insurance company limited. Prepare a revenue
account in respect of fire insurance business.

Particulars amount
Claims paid 480,000
Claims outstanding on 1.4.2016 40,000
Claims intimated and accepted but not paid on 31.03.2017 70,000
Premiym received 12,00,000
Reinsurance premium paid 1,20,000
Commission 2,00,000
Commission on reinsurance ceded 8,000
Commission on reinsurance accepted 4,000
Expenses of management 3,02,000
Provision for unexpired ris on 1.4.2016 4,00,000
Additional provision for unexpired risk on 1.4.2016 20,000
Bonus utilized in reduction of premium 12,000
Reinsurance recoveries of claims 8,000
Medical expenses regarding claims 5,000
Loss on sale of motor car 3,500
Bad debts 2,500
Refund of double taxation 4,500
Interest and dividends 8,000
Income tax deducted thereon 1,500
Legal expenses regarding claims 4,000
Profit on sale of investments 3,500
Rent on sale of quarters deducted from salaries 2,400
Depreciation of furniture 4,600
You are required to provide for additional reserve for unexpired risk at 1% of net premium in addition to opening
balance of additional reserve.

Problem 11:

From the following balances of National Insurance co ltd., as on 31.03.2017 prepare (i) fire revenue account (ii)
marine revenue account and (iii) profit and loss account

Particulars Fire Marine

Bad debts 20,000 48,000
Reserve as on 1.4.2016 10,00,000 32,80,000
Claims paid and outstanding 7,60,000 15,20,000
Commission paid 3,60,000 4,32,000
Additional reserve (1.4.2016) 2,00,000 -
Premium less reinsurance 24,00,000 43,20,000
Management expenses 5,80,000 16,00,000
Commission earned on reinsurance ceded 1,20,000 240,000
Auditors fees 12,000
Directors fees 12,400
Share transfer fees 3,200
Bad debts recovered 4,800
 Depreciation 1,40,000
Interest dividend received 56,000
Difference in exchange (cr) 1,200
Sundry receipts 20,000
Profit on sale of land 2,40,000
In addition to the usual reserve additional reserve in case of fire insurance is to be increase by 5% of net premium.

Problem 12:

Following balances are extracted from the books of United Insurance Company Limited as on 31.03.2017

Particulars Fire Marine

Claims paid 1,00,000 87,000
Premium 3,74,000 2,97,000
Commission on reinsurance ceded 13,000 -
Commission 62,000 51,000
Expenses of management 86,000 68,000
Reserve for unexpired risks 1.4.2016 2,10,000 240,000
Additional reserve 1.4.2016 60,000 10,000
Claims outstanding 1.4.2016 24,000 11,000
Premium outstanding 1.4.2016 26,000 17,000
Depreciation on assets 36,000
Loss on realization of investments 8,000
Audit fees 13,000
Director’s remuneration 36,000
Interest and dividend 63,000
Following further information is also given:

a. Premium outstanding on 31.03.2017: fire=33000, marine=15000

b. Claims outstanding on 31.03.2017: fire= 46000, marine= 17000
c. Out of the above, a fire claim amounting to Rs11000 was recovered by reinsurance
d. Reserve for unexpired risks to be maintained at 50% of fire and 100% for marine on net premium
e. Additional reserve for fire to be maintained at 20% net premium
f. Interest accrued on investments Rs13000
Prepare revenue account, profit and loss account for the year ended 31.03.2017.

Problem 13:

From the following particulars prepare the Fire Revenue Account for the year ending 31st march 2017

Particulars Amount
Claims paid 2,35,000
Legal expenses regarding claims 5,000
Premiums received 6,00,000
Re-insurance premiums 60,000
Commission 1,00,000
Expenses of management 1,50,000
Provision against unexpired risk(1.4.2016) 2,60,000
Claims unpaid (1.4.2016) 20,000
Claims unpaid (31.03.2017) 35,000
Problem 14:

Zaldi Pay Insurance Company Limited has furnished the following information for preparation of Revenue Account
for Fire Insurance Business for the year ended 31.03.2017
 Particulars Amount
Claims admitted but not paid 42,376
Commission paid 50,000
Commission on reinsurance ceded 12,000
Share transfer fees 2,000
Expenses of management 78,000
Bad debts 2,500
Claims paid 15,000
Premiums received less reinsurance 5,52,000
Reserve for unexpired risk on 1.4.2016 2,30,000
Additional reserve on 1.4.2016 40,000
Claims outstanding as on 1.4.2016 27,000
Dividend on share capital 18,500
The following further information has also to be considered:

a. Premiums outstanding at the end of the year Rs40,000

b. It is the policy of the company to maintain 50% of premium towards reserve for unexpired risks
c. Additional reserve 10% of net premium to be maintained