THE APPLICATION OF ACCOUNTING PRINCIPLE IN INSURANCE COMPANIES
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Enugu, Nigeria
Nigeria
Enugu State
Nigeria
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info@projectng.com

The Application Of Accounting Principle In Insurance Companies

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THE APPLICATION OF ACCOUNTING PRINCIPLE IN INSURANCE COMPANIES (A CASE STUDY OF CAPITAL EXPRESS ASSURANCE LTD ENUGU)

ABSTRACT

The aim of this research titled “The Application of Accounting Principle in Insurance Industries” is to examine how insurance companies apply accounting principles in their operations and the extent of adherence. The work was divided into chapters. The first chapter is the introductory part of the research work. This chapter also contains the background of the study, statement of problems; research question etc. data for the study was sourced from two main sources which include primary and secondary sources of data collection. Primary data are made up of questionnaires and oral interview. From the respondents. Secondary data were gathered from journals, magazine and other relevant materials relating to area of my investigation. The research instrument used in this study include: oral interview and questionnaire. The questionnaire is structural as to contained both close and open ended question. Simple table and percentage as used in treatment of data in the research work. From the findings, conclusions were drawn and recommendations were also made in the last chapter of this work which is the fifth chapter.

 

 

 

 

TABLE OF CONTENTS

Title Page                                                              i

Approval Page                                                        ii

Dedication                                                             iii

Acknowledgment                                                   iv

Abstract                                                               vi

Table of contents                                                   vii

CHAPTER ONE

1.0  Introduction                                                

1.1      Background of the study                                   1

1.2 Statement of problems                                      4

1.3 Objective of the study                                       5

1.4 Research Question                                             5

1.5 Significance of the study                                    6

1.6  Scope of the study                                           8

1.7  Limitations of the study                                    8

CHAPTER TWO                  

2.0 Literature Review

2.1 The Terminology Committee of American             11

2.2 Accounting Concepts                                         13

2.2.1 Business Entity Concept                                  14

2.2.2 Money Measurement Concept                           14

2.2.3 Going Concern Concept                                   15

2.2.4 Dual Aspect Concept or Equation Concept          16

2.2.5 Historical Record Concept or Realization

Concept                                                         17

2.2.6 Cost Concept                                                 18

2.2.7 Accounting Period Concept                               19

2.2.8 Matching Concept                                           19

2.3 Accounting Conventions or Doctrine of

Accounts                                                        20

2.4  Basis Of Accounting of Transactions                   22

2.5  Accounting Equation                                        25

2.6      Insurance Aspect                                             26

2.7      Types of Insurance                                    27

2.8      System of Book Keeping in Accounting

Principle                                                         29

CHAPTER THREE

3.0 Research Design and Methodology

3.1  Research Design                                              39

3.2 Area of the study                                              40

3.3  Population of the study                                     41

3.4 Sampling Method                                              41

3.5  Research Instrumentation                                 43

3.6  Validity and Reliability of the Instrument             44

3.7 Sources of Data Collection                                  46 3.8 Method of Data Analysis                                     48

 

 

CHAPTER FOUR

4.0  Data presentation and analysis

4.1 Presentation and Analysis of Data                        49

4.2 Presentation and Analysis of Result                      49

CHAPTER FIVE

5.0      Summary of Findings, Conclusion and Recommendations

5.1   Summary of Findings                                       54

5.2 Conclusion                                                       56

5.3        Recommendation                                           57

Bibliography                                         60

Appendix I                                                  61

Appendix II                                                 62

 

CHAPTER ONE

INTRODUCTION

1.2     BACKGROUND OF THE STUDY

Business is one of the sources of earning income. When a business is started, it requires investment of certain amount which is called capital. With this amount of capital the businessman may deal either on trading business or manufacturing business. In a trading business, he will buy goods at a lesser price and sells the same to others at a higher price.

 In case of manufacturing business he has to buy raw materials and incure other expenses in the form of wages and salaries, rent, power, insurance, tax, transport, postal and telephone expenses and so on, in the course of production and distribution of goods. In a small sized business the transactions are simple and less in number. But in a large sized business the transactions are numerous. These business transactions enable the businessman to know the result of his business which can be profit or loss for a given period of time. In order to know the result of his business, a businessman has to remember all the transactions of his business. However, owing to lack of memory it is not possible for anybody to remember all the transactions over a period of time. This has given rise to maintenance of a set of accounting books in which business transactions are chronologically recorded. The systematic recording of business transactions enable the businessman to account for every transaction without missing any item.

Such a system of maintenance of a set of accounting books to record business transactions is known as book keeping system.

Before accounting concepts and conventions are discussed, it will be appropriate to know the meaning of the term “accounting principle”. In olden days when size of the business was small and less complicated, the accounting information was felt only by the proprietor of a business. In modern days, with the growth of the business organizations, the transactions have become more in number. Unless these transactions are recorded according to a definite principle by all the business enterprises it is difficult to maintain uniformity in accounting system. Such uniformity is also necessary because many parties such as investors, creditors, employees, government and general public are interested to know the affairs of the business. If every business follows its own accounting practices, the final accounts may not be understandable to all such parties. So there is a scope for misinterpreting the position of the business by all persons interested in the business. Hence there is a need to follow a uniform accounting principles from the stage of recording the transactions up to the stage of preparing final accounts.

1.2 STATEMENT OF PROBLEMS

The following problems led to the formulation of this research work:

Insurance companies has not been complying  to accounting principles in their day to day activities.

Insurance firms in Nigeria has not been adhering to accounting principles and standards in their various organization.

The non adherence to the accounting principles has contributed to failure of most insurance firms in Nigeria.

1.3 OBJECTIVE OF THE STUDY

The aim of this research work is to specifically examine the application of accounting principles in insurance companies. The other objectives of this research work includes the following:

To examine how insurance companies apply accounting principles.

To know the extent the insurance company can adhere to accounting principles.

To determine the implication of non adherence to accounting principles.

To proffer possible solutions to the problems identified.

1.4 RESEARCH QUESTION

How do insurance companies apply accounting principles?

To what extent does insurance companies adhere to accounting principles?

What are the implications of non adherence to accounting principles?

What are the possible solutions to the problems of non adherence to accounting principles by insurance companies?

1.5 SIGNIFICANCE OF THE STUDY

This research work will be of immense help to:

The student: it will help the researcher to know more on the application of accounting principles in insurance companies.

This study will be of great importance to stake holders as it will enrich their knowledge on the various accounting principles and its relevance in the insurance companies.

This will equally be of help to the insurance companies and financial institutions in Nigeria because when they abide by the recommendations provided by the researcher it will help them in time of financial crisis.

The country at large: this study will be of great importance to the country Nigeria as it will help the policy makers to prorogate laws that will guide the application of accounting principles in insurance companies.    

1.6  scope of the study

The study focus attention practically in all the activities of insurance companies especially those related to financial terms. These areas will include buying of raw materials, hiring production and sales, payment and collection of debts, etc.

Respondent to the study will be selected from all departments and even beyond the company. However, a certain sampling procedure, as will been seen later, is adopted to achieve a certain level of reliability of the data gotten.

1.7  LIMITATIONS OF THE STUDY

The researcher in carrying out this study encountered numerous problems which includes:

·        Fund

·        Time

·        Lack of Research materials

·        Response of the Respondents

Fund:  The researcher did not have enough money to visit most insurance companies as money required was not available.

Time:  The time allotted for the work was not enough. This is because I had to share the time with other academic works of the semesters. This made the researcher unable to cover a lot of interesting areas but therefore limited his research work only at Enugu metropolis.

Lack of Research Material:  Lack of research materials was also one of the problems faced by the researcher in the cause of this research work.

Responses of the Respondents

Another constraint to the researcher is that some of the respondents found it difficult to express themselves as regards to the subject matter.

 

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