Journal Entry for Life Insurance Premium & Employee’s Life Insurance Premium

1. Life Insurance Premium:

Sometimes, Life Insurance Premium is paid by the business on the behalf of the proprietor. Life Insurance Premium of the proprietor is considered to be a personal expense of the proprietor and hence is treated as Drawings by the business.

Journal Entry: 

Example: Life Insurance Premium is paid ₹5,000.

Solution:

2. Employee’s Life Insurance Premium:

Businesses purchase life insurance for their employees too. Unlike the Life Insurance Premium of the proprietor, any payment made on purchasing Employee’s Life Insurance is not considered a personal expense rather it is treated as a business expense.

Journal Entry: 

Example: Employee’s Life Insurance Premium is paid ₹10,000.

Solution: