Explanation:

Joint Life Policy (JLP) is a policy which is decided by the partners of the firm on the joint lives of other partners. The purpose of the joint life policy is to reduce the financial burden on the firm at the time of payment of a large sum to the legal representative of the deceased partner. The insurer receives the payout when after the death of his insure partner. There are different methods for the accounting treatment of Joint Life Policy.

When the partners decide to treat the premium on Joint Life Policy as an expense and debit the Premium A/c to the Profit and Loss A/c every year, the Joint Life Policy will not appear in the Balance Sheet.In this situation, the full amount of policy received in the event of the death of a partner from the Insurance Company becomes a gain.