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  • Premium Liability

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    Cenelyn Pajarilla
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    This document discusses accounting for premium liability. Entities offer premiums to customers to generate sales after they purchase a product. There is a possibility the premiums will be expensed in the future, so this should be recognized. When customers buy premiums, cash is received, and when premiums are given back to customers, a premiums expense is recorded reducing the premiums account. If premiums are still outstanding and not given back, a premium expense reduces the estimated premium liability account.

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    This document discusses accounting for premium liability. Entities offer premiums to customers to generate sales after they purchase a product. There is a possibility the premiums will be expensed in the future, so this should be recognized. When customers buy premiums, cash is received, and when premiums are given back to customers, a premiums expense is recorded reducing the premiums account. If premiums are still outstanding and not given back, a premium expense reduces the estimated premium liability account.

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    3 views1 page

    Premium Liability

    Uploaded by

    Cenelyn Pajarilla
    This document discusses accounting for premium liability. Entities offer premiums to customers to generate sales after they purchase a product. There is a possibility the premiums will be expensed in the future, so this should be recognized. When customers buy premiums, cash is received, and when premiums are given back to customers, a premiums expense is recorded reducing the premiums account. If premiums are still outstanding and not given back, a premium expense reduces the estimated premium liability account.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    PREMIUM LIABILITY

    -In order to generate sales, entities offers premiums to customers after they purchase a certain
    product.
    - The possibility that the premiums will be expensed in the future should be recognized.
    - when the premiums are bought
    Premiums
    Cash
    -when the premiums are given back to customers
    Premiums Expense
    Premiums
    -when the premiums was not given to customers (if premiums are still outstanding)
    Premium Expense
    Estimated premium liability

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