The following trial balance was extracted from the books of Bima Insurance Ltd as at 30 June 2006 Sh

The following trial balance was extracted from the books of Bima Insurance Ltd as at 30 June 2006

Sh’000’

Sh’000’

Net earned premiums:

Fire

139,668

Motor

259,456

Net commissions:

Fire

3,466

Motor

6,938

Net earned paid:

Fire

55,784

Motor

111,562

Net claims outstanding as at 1 July 2005:

Fire

72,036

Motor

144,074

Management expenses to be charged to revenue accounts

155,108

Management expenses not to be charged to revenue accounts

20,000

Bad debts

5,000

Treasury bills

199,100

Treasury bonds

11,386

Deposits in banks

474,100

Motor vehicles (net book value-1 July 2005)

1,000

Equipment (Net book value – 1 July 2005)

14,414

Amounts due to other insurance companies

4,000

Amounts due from other insurance companies

6,940

Bank overdraft

16,000

Share capital

120,000

Investment income

72,000

Other income

17,564

Revaluation reserves

50,000

Retained earnings as at 1 July 2005

30,000

Unearned premium reserves as at 1 July 2005:

Fire

40,000

Motor

100,00

1,064,798

1,064,798

Additional information:

1 Management expenses are to be apportioned to revenue accounts on the basis of net earned premiums

2 The management made the following estimates as at 30 June 2006:

Sh’000’

Net claims outstanding: Fire 90,000

Motor 158,000

3 Reserve for unexpired risks as at 30 June 2006 is to be maintained at 50% of the respective net earned premiums for both the fire and motor businesses

4 Depreciation on motor vehicles and equipment is to be provided using the reducing balance method at the rates of 20% and 10% per annum respectively

Required:

(i) Revenue accounts for the year ended 30 June 2006

(ii) Profit and loss account for the year ended e0 June 2006

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