GK
ACCOUNTING
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
If the premium is paid on the life policy of the proprietor of the business, it is
|
|
Taken to the Trading Account
|
|
|
Taken to the Profit and Loss Account
|
|
|
Taken to the Balance Sheet and is shown as an asset
|
|
|
Treated as the drawings and is shown by way of deduction from the capital account
|
Explanation:
Detailed explanation-1: -Insurance premium paid on the life of proprietor is a personal expense and to be debited to drawings account. This has to be deducted from capital account.
Detailed explanation-2: -Life Insurance premium is a personal expense and to be recorded as drawings.
Detailed explanation-3: -Life Insurance Premium paid are the ‘drawings’ by the proprietor. Life Insurance Premium is considered to be a personal expense of a person and it is recorded as drawings. Hence, the above statement is true.
There is 1 question to complete.