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From the information given below, you are to find out the amount to be appropriated for Reserve for unexpired risk in fire insurance: Premium received during the year ended 31.03.2021 Rs.12,00,000. Reinsurance premiums Rs.3,00,000; Bonus in reduction of premium (not yet adjusted in premiums) Rs.50,000.?
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From the information given below, you are to find out the amount to be...
Calculation of Reserve for Unexpired Risk in Fire Insurance
The reserve for unexpired risk in fire insurance is a provision that insurance companies set aside to cover potential claims on policies that are still in effect but have not yet expired. This reserve is established to ensure that the insurance company has enough funds to meet its future obligations to policyholders.
To calculate the amount to be appropriated for the reserve for unexpired risk in fire insurance, we need to consider the premium received during the year, reinsurance premiums, and any bonus in reduction of premium.
Step 1: Calculate Net Premium Earned
Net Premium Earned = Premium received during the year - Reinsurance premiums
Net Premium Earned = Rs.12,00,000 - Rs.3,00,000
Net Premium Earned = Rs.9,00,000
Step 2: Calculate the Bonus in Reduction of Premium
Bonus in Reduction of Premium = Rs.50,000
Step 3: Calculate Reserve for Unexpired Risk
The reserve for unexpired risk is usually calculated as a percentage of the net premium earned. The percentage can vary depending on the company's experience and the nature of the policies underwritten. Let's assume a reserve rate of 20%.
Reserve for Unexpired Risk = Net Premium Earned * Reserve Rate
Reserve for Unexpired Risk = Rs.9,00,000 * 20%
Reserve for Unexpired Risk = Rs.1,80,000
Step 4: Appropriation of Reserve for Unexpired Risk
The reserve for unexpired risk is usually appropriated in the following manner:
- 50% of the reserve is transferred to the Profit and Loss Account as profit.
- 50% of the reserve is retained in the balance sheet as a provision.
Appropriation of Reserve for Unexpired Risk = Reserve for Unexpired Risk / 2
Appropriation of Reserve for Unexpired Risk = Rs.1,80,000 / 2
Appropriation of Reserve for Unexpired Risk = Rs.90,000
Conclusion:
Based on the information given, the amount to be appropriated for the reserve for unexpired risk in fire insurance is Rs.90,000. This amount will be divided into two parts, with 50% transferred to the Profit and Loss Account as profit and 50% retained in the balance sheet as a provision.
The reserve for unexpired risk in fire insurance is a provision that insurance companies set aside to cover potential claims on policies that are still in effect but have not yet expired. This reserve is established to ensure that the insurance company has enough funds to meet its future obligations to policyholders.
To calculate the amount to be appropriated for the reserve for unexpired risk in fire insurance, we need to consider the premium received during the year, reinsurance premiums, and any bonus in reduction of premium.
Step 1: Calculate Net Premium Earned
Net Premium Earned = Premium received during the year - Reinsurance premiums
Net Premium Earned = Rs.12,00,000 - Rs.3,00,000
Net Premium Earned = Rs.9,00,000
Step 2: Calculate the Bonus in Reduction of Premium
Bonus in Reduction of Premium = Rs.50,000
Step 3: Calculate Reserve for Unexpired Risk
The reserve for unexpired risk is usually calculated as a percentage of the net premium earned. The percentage can vary depending on the company's experience and the nature of the policies underwritten. Let's assume a reserve rate of 20%.
Reserve for Unexpired Risk = Net Premium Earned * Reserve Rate
Reserve for Unexpired Risk = Rs.9,00,000 * 20%
Reserve for Unexpired Risk = Rs.1,80,000
Step 4: Appropriation of Reserve for Unexpired Risk
The reserve for unexpired risk is usually appropriated in the following manner:
- 50% of the reserve is transferred to the Profit and Loss Account as profit.
- 50% of the reserve is retained in the balance sheet as a provision.
Appropriation of Reserve for Unexpired Risk = Reserve for Unexpired Risk / 2
Appropriation of Reserve for Unexpired Risk = Rs.1,80,000 / 2
Appropriation of Reserve for Unexpired Risk = Rs.90,000
Conclusion:
Based on the information given, the amount to be appropriated for the reserve for unexpired risk in fire insurance is Rs.90,000. This amount will be divided into two parts, with 50% transferred to the Profit and Loss Account as profit and 50% retained in the balance sheet as a provision.
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From the information given below, you are to find out the amount to be appropriated for Reserve for unexpired risk in fire insurance: Premium received during the year ended 31.03.2021 Rs.12,00,000. Reinsurance premiums Rs.3,00,000; Bonus in reduction of premium (not yet adjusted in premiums) Rs.50,000.?
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From the information given below, you are to find out the amount to be appropriated for Reserve for unexpired risk in fire insurance: Premium received during the year ended 31.03.2021 Rs.12,00,000. Reinsurance premiums Rs.3,00,000; Bonus in reduction of premium (not yet adjusted in premiums) Rs.50,000.? for B Com 2024 is part of B Com preparation. The Question and answers have been prepared according to the B Com exam syllabus. Information about From the information given below, you are to find out the amount to be appropriated for Reserve for unexpired risk in fire insurance: Premium received during the year ended 31.03.2021 Rs.12,00,000. Reinsurance premiums Rs.3,00,000; Bonus in reduction of premium (not yet adjusted in premiums) Rs.50,000.? covers all topics & solutions for B Com 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for From the information given below, you are to find out the amount to be appropriated for Reserve for unexpired risk in fire insurance: Premium received during the year ended 31.03.2021 Rs.12,00,000. Reinsurance premiums Rs.3,00,000; Bonus in reduction of premium (not yet adjusted in premiums) Rs.50,000.?.
From the information given below, you are to find out the amount to be appropriated for Reserve for unexpired risk in fire insurance: Premium received during the year ended 31.03.2021 Rs.12,00,000. Reinsurance premiums Rs.3,00,000; Bonus in reduction of premium (not yet adjusted in premiums) Rs.50,000.? for B Com 2024 is part of B Com preparation. The Question and answers have been prepared according to the B Com exam syllabus. Information about From the information given below, you are to find out the amount to be appropriated for Reserve for unexpired risk in fire insurance: Premium received during the year ended 31.03.2021 Rs.12,00,000. Reinsurance premiums Rs.3,00,000; Bonus in reduction of premium (not yet adjusted in premiums) Rs.50,000.? covers all topics & solutions for B Com 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for From the information given below, you are to find out the amount to be appropriated for Reserve for unexpired risk in fire insurance: Premium received during the year ended 31.03.2021 Rs.12,00,000. Reinsurance premiums Rs.3,00,000; Bonus in reduction of premium (not yet adjusted in premiums) Rs.50,000.?.
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From the information given below, you are to find out the amount to be appropriated for Reserve for unexpired risk in fire insurance: Premium received during the year ended 31.03.2021 Rs.12,00,000. Reinsurance premiums Rs.3,00,000; Bonus in reduction of premium (not yet adjusted in premiums) Rs.50,000.?, a detailed solution for From the information given below, you are to find out the amount to be appropriated for Reserve for unexpired risk in fire insurance: Premium received during the year ended 31.03.2021 Rs.12,00,000. Reinsurance premiums Rs.3,00,000; Bonus in reduction of premium (not yet adjusted in premiums) Rs.50,000.? has been provided alongside types of From the information given below, you are to find out the amount to be appropriated for Reserve for unexpired risk in fire insurance: Premium received during the year ended 31.03.2021 Rs.12,00,000. Reinsurance premiums Rs.3,00,000; Bonus in reduction of premium (not yet adjusted in premiums) Rs.50,000.? theory, EduRev gives you an
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