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bank paid insurance premium

Insurance premium is paid by the Bank, thus, the bank balance has decreased with the amount of premium. However, the balance of the cash book is not decreased with the amount of premium. Therefore, if you are starting with the balance as per cash book then deduct this item from the available balance and add this item if you are starting with the balance as per pass book.

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Insurance Premium is directly paid by the Bank and, therefore, the bank balance has decreased by the amount of premium. In Pass Book, insurance premium appears as a payment.

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But Cash Book does not show any payment for this, i.e. its balance is not decreased for insurance premium.

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Make your calculation accordingly depending on from which types of balance (positive or negative) and which book (Cash or Pass) you start the answer.

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Bank a/c dr.

To insurance premium a/c

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it will go in minus item ( if starting with bal. as per cash book)

it will go in plus item (if starting wiyh bal. as per pass book)

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drawings (Dr.)

to bank

(being insaurance premeium paid.)

this implies that pass book shows deduction of the amount . There is no recording in the cash book.

Then in pass book , it should be added (+) , to make pass book equallent to cash book.

in cash book , it should be substracted (-) , to make cash book equallent to pass book

HOPE THIS HELPS....

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