CHAPTER ONE

INTRODUCTION

1.1  Background of the Study

Insurance company is a district and specialized account that is always referred to as “specialized account” just like taxation is a specialized area. Though it employs the general accounting principles, concepts and conventions, there are needs for a clear understanding of its preparations.

In the days of T-form presentation of financial statement an insurance company account could be easily recognized from the side of the “T” to which income and expenditure items are posted, they are no in conventional form. The conventional was placing revenue to the right of the “T” insurance company revenue items to the left of the “T” and expenditure items to the right.

Nowdays, there are other features that distinquish accounting system in insurance industry or company or company’s from their accounting system, they are as follows.

i.            Requirement by law for remitting of quarterly and annual returns to central banks of Nigeria (CBN) and Nigerian Insurance Company Supervisory Board (NISB).

ii.          Requirement by law for conditions of returns to the Nigerian insurance supervision board (NISB) with stated deadline.

iii.        Prescription by law of the type and level of level of statement of insurance.

iv.         Requirement by law of the maintenance of resources know as “TECHNICAL RESERVES” comprising of insurance fund, reserves for understanding losses reserves for incurred but not reported and contingency reserves. All these are in addition to rendition of the required returns to the corporate affairs commission (CAC) being and incorporated company under in pursuant to the companies and allied matters decree (CAMD) 1991.

From the above, it can therefore he seen that without a proper understanding of intricacies involved in both the interpretation of the decree as well as items that makes up insurance accounts and right treatment is afforded to the financial statement as narrated will not give a true and fair view of the statement of affairs and of profit and loss for the period.