A, B and C are partners in a firm sharing profits in the ratio 2:2:1. The firm had taken a joint life policy Rs 80,000 on the lives all the partners on 01-04-2012. The firm pays annual premium Rs 6,000. The surrender value of the policy is as under :
31-03-2013 Nil, 31-03-2014 Rs 2,000; 31-03-2015 Rs 4,000 and 31-03-2016 Rs 6,000.
C died on 01-06-2016, prepare the necessary accounts in the books of the firm.
- If premium paid is treated as trade expenses.
- Premium paid is treated as an investment.
- Premium paid is treated as investment and reserve is created.
