Illustration 1
The following balances were extracted from the books of All Peoples Assurance Co. Ltd:
Life Assurance fund 1,470,562
Claims: by death 76,980
: by maturity 56,420
Premiums 210,572
Expenses of management 19,890
Commissions 26,541
Consideration for annuities granted 10,620
Interest, dividends, and rent 52,461
Income tax on these (paid) 3,060
Surrenders 21,860
Annuities 29,420
Bonus paid in cash 9,450
Bonus utilised in reduction of
Premium 2,500
Preliminary expenses 600
Claims admitted but unpaid at
Year end 80,034
Annuities payable 22,380
Paid up share capital 400,000
Government securities 1,490,890
Sundry assets 509,110
Fines for revising lapsed policies 92
Required: Prepare a revenue account and Statement of Financial Posistion after taking into account the
following:
a) Claims covered under reinsurance – Sh10,000 Claims by
b) Further claims intimated – Sh8,000 death
c) Further bonus utilised in reduction of premium – Sh1,500
d) Interest accrued – Sh15,400
e) Premiums outstanding – Sh7,400
The following balances appeared in the books of X-Mutual Life Assurance Society Ltd on 31 March
2022.
Sh
Claims paid during the year (Less re-assurance): by death 2,200,000
: by maturity 1,500,000
Annuities 6,000
Furniture and office equipment at cost (including Sh40,000 bought during the year 250,000
Printed Stationery 77,000
Bank Current Account 1,350,000
Cash and stamps in hand 30,000
Surrenders less reassurances 40,000
Commissions 250,000
Expenses of management 3,100,000
Sundry deposits with electricity companies, etc. 500
Advance payment of income tax (year end) 50,000
Sundry debtors 50,000
Agents’ balances 100,000
Income tax paid 450,000
Tax on interest, dividends and rents 500,000
Loans on mortgages 150,000
Loans on policies 3,250,000
Investments (including Sh250,000 deposited with CBK) 52,000,000
House property at cost (including Sh85,000 added during the year) 5,400,000
70,754,000
Life Assurance Fund B/F 50,000,000
Premiums less reassurances 15,000,000
Claims less reassurances at beginning of year: Death 900,000
: Maturity 600,000
Credit balances pending adjustment 60,000
Consideration for annuities granted 2,000
Interest dividends and rents 1,800,000
Registration and other fees 2,000
Sundry deposits 100,000
Taxation provision (at beginning of year) 300,000
Premium deposits 1,150,000
Sundry Creditors 350,000
Contingency reserve 150,000
Furniture/Equipment depreciation A/C 40,000
Building depreciation A/C 300,000
70,754,000
From the foregoing balances and the following information, prepare the society’s Statement of Financial
Posistion as on 31 March 2022, and its revenue A/C for the year ended on that date:
a) Claims less reassurances outstanding at year end : By death 600,000
: By maturity 400,000
b) Management expenses outstanding – Sh60,000; prepaid – Sh15,000
c) Provide Sh45,000 for depreciation of buildings, Sh15,000 for depreciation of furniture and
equipment, and Sh110,000 for taxation.
d) Premium outstanding Sh2,028,000; commission thereon Sh65,000.
e) Interest, dividends and rent accrued and outstanding 380,000.
f) The society holds sh120,000 government securities (not included in the above balances) deposited by
chief agents as security.
Interim bonus paid during the year was Sh15,000
