Health Insurance Accounting Entries

Purchasing Health Insurance for Employees

Scenario: ABC Pvt Ltd purchases health insurance for its employees costing ₹1,20,000 annually, paid upfront.

1. Initial Transaction Recording

Particulars	Debit (₹)	Credit (₹)
Prepaid Insurance A/c	1,20,000
To Cash/Bank A/c		1,20,000
(Being health insurance purchased for employees)

Explanation:

• Prepaid Insurance A/c is debited to record the cost of the insurance as an asset.
• Cash/Bank A/c is credited to reflect the cash outflow for the payment.

Monthly Amortization of Prepaid Insurance

Scenario: ABC Pvt Ltd amortizes the prepaid insurance monthly (₹1,20,000/12 = ₹10,000 per month).

Journal Entry for Each Month

Particulars	Debit (₹)	Credit (₹)
Insurance Expense A/c	10,000
To Prepaid Insurance A/c		10,000
(Being monthly amortization of prepaid health insurance)

Explanation:

• Insurance Expense A/c is debited to recognize the monthly insurance expense.
• Prepaid Insurance A/c is credited to reduce the prepaid insurance asset.

Monthly Health Insurance Premium Payment

Scenario: XYZ Pvt Ltd pays ₹10,000 monthly for health insurance for its employees.

Journal Entry

Particulars	Debit (₹)	Credit (₹)
Insurance Expense A/c	10,000
To Cash/Bank A/c		10,000
(Being monthly health insurance premium paid)

Explanation:

• Insurance Expense A/c is debited to record the insurance expense.
• Cash/Bank A/c is credited to reflect the cash outflow for the premium payment.

Receiving Health Insurance Claims

Scenario: ABC Pvt Ltd receives an insurance claim reimbursement of ₹30,000 for an employee's medical expenses.

Journal Entry

Particulars	Debit (₹)	Credit (₹)
Cash/Bank A/c	30,000
To Insurance Claims Receivable A/c		30,000
(Being insurance claim received for employee's medical expenses)

Explanation:

• Cash/Bank A/c is debited to reflect the receipt of cash from the insurance claim.
• Insurance Claims Receivable A/c is credited to eliminate the receivable.

Accrued Insurance Expense

Scenario: ABC Pvt Ltd accrues a health insurance expense of ₹12,000 for the month, to be paid next month.

Journal Entry

Particulars	Debit (₹)	Credit (₹)
Insurance Expense A/c	12,000
To Accrued Expenses A/c		12,000
(Being monthly health insurance expense accrued)

Explanation:

• Insurance Expense A/c is debited to recognize the insurance expense for the month.
• Accrued Expenses A/c is credited to record the liability.

Paying Accrued Insurance Expense

Scenario: ABC Pvt Ltd pays the accrued insurance expense of ₹12,000.

Journal Entry

Particulars	Debit (₹)	Credit (₹)
Accrued Expenses A/c	12,000
To Cash/Bank A/c		12,000
(Being payment of accrued health insurance expense)

Explanation:

• Accrued Expenses A/c is debited to eliminate the liability.
• Cash/Bank A/c is credited to reflect the cash outflow for the payment.