Abstract
This study will survey a critical review of the accounting system in Nigeria’s insurance industry. This study as a case study is an attempt to review the problems of accounting system in industrial and general insurance company limited. It has become necessary because of proper understanding and correct treatment in various items in the account. This study will make a fair contribution towards the understanding of the treatment of various items by insurance companies. In collecting the data for the study, the researcher will made use of the tools like structured and in structured interview and question will form primary method data collection while secondary will consist annual report, accounts, journals, insurance year book, and text books etc. Finally, the conclusion will be that though there are lack of proper understanding and correct treatment of various items in the accountant of the insurance companies, however, the problem can be solve if the researcher can bring to light the difference in the treatment of various items by insurance companies and its effect on intra and inter-company comparison.
CHAPTER ONE
INTRODUCTION
Insurance accounting as relates to insurance company is a distinct and specialized account that is always referred to as “specialized Accounting” just like taxation is a specialized area. Though it employees the general accounting principles, concepts and conventions, there in need for a clear understanding of its preparations. In the days of “T- forms” presentation of financial statements an insurance company account could be easily recognized form the sides of the “T” to which income and expenditure items are placed. They were reversed and therefore not in conventional form. The convention was placing revenue items to the right of the “T” insurance company revenue, profit and loss account had the revenue items to the legit of the “T” and expenditure items to the right.
Nowadays, the vertical forms of presentation are adopted and this peculiarity of reversal of sides is no longer these. However, there are other features that distinguish accounting system in insurance industry or company form other accounting system. There are:
iii. Requirement by law for the maintenance of margin of solvency.
The growth in the volume of transaction as well as the increase I the total number of insurance companies in Nigeria make it important to have an adequate and practical understanding of the various items and their treatment, in the accounts as they relate to insurance company. Despite the role-played by the industry in the economy, hence. There is needed to make research in the problems facing the industry as regard accounting. These problems are the following below:
iii. Treatment of investment income and commission.
vii. Problem of defining gross premium, net premium are their treatment in the accounts.
viii. Inadequate on-the –job training for staff.
The objective of this research work is to find solution to the above-mentioned problems and at the same time explain and illustrate some of the items so as to practically assist staff in the account department of the industry. The objectives are:
1.4 RESEARCH HYPOTHESES
Hypothesis One
HO: there are no differences between treatment of various items by insurance companies and it effect on intra and inter-company comparisons
HI: there are no differences between treatment of various items by insurance companies and it effect on intra and inter-company comparisons
Hypothesis Two
HO: there are no forms of computation and treatment of various forms of reserve.
HI: there are forms of computation and treatment of various forms of reserve
The industry keeps growing, which shows an increase in the public founds placed in another person’s hands in form of premium. There is then the need for proper and adequate reporting so that confidence in the industry can be established. Capital market internalization distress in the economy and subsequent need for merger and acquisition as a means of survival calls for proper understanding as well as treatment of items upon which the financial statement is based which will be used for all these. The insurance Decree 1991 has a lot of stringent conditions that must be complied with by the industry as it relates to the account which if not treated may cost the industry move than expected. The users of financial statements are numerous hence if the preparation is fault, it becomes misleading to the users and public at large. The industry also has a state in the economic developments of a company performing such roles as institutional investor, risk bearers, employer of labour as well as wealth creator. For an industry perfuming such roles enumerated above it is expedient to consider preparation and presentation an almost importance and real value to the industry.
1.6 SCOPE AND LIMITATION OF THE STUDY
The project is basically an overview of accounting system in insurance industry and as such it will be limited to that it will involve visiting a couple of insurance companies and general insurance company limited (IGI) to actually assess their work and the preparation of their accounts. The researcher encounters some constrain which limited the scope of the study;
1.7 DEFINITION OF TERMS
For easy understanding some operational terms in the insurance accounting are hereby defined
7 BROKERAGE: – This is commission paid to broker.
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