What Happens to the Statement We Receive?

The same process as above, because we are now the debtor and it is up to us to pay our debt after deducting Cash Discount if entitled to do so.

(c) The Receipt

A receipt is a business document which is given to a debtor when he pays a debt; as proof of payment. It should be made out at once on receiving the payment and be either

given, or sent through the post, to the debtor.

As already explained in the section on cheques the law has been changed in Great Britain by the Cheque Act, 1957, so that receipts are not longer necessary when payments are made by cheque. The cheque itself acts like a receipt when cleared by the paying banker, but it is not a receipt, in that it does not acknowledge that a particular debt has been paid.

(iv) The Order

An order may be merely in the form of a letter, but may be prepared on a specially printed form issues by the supplier. This is to make it convenient for his stores department to prepare the order, since the goods are usually arranged in the warehouse in the same sequence as on the order form.

Such orders can be extremely complicated, listing hundreds of items, and it is impossible to reproduce one here. Where the customer is unlikely to want more than half a dozen items a simpler type of order is used which permits the customer to write in what is required; but the order form is printed so that the supplier can make clear what his terms of business,, carriage, etc. are.

The layout of the form may also help his accounts department in recording the many small orders received. Well laid out to assist the accounts staff and with sensible cross-references to the current brochure issued by the nursery.

(v) The Debit Note-A Document Very Like an Invoice

Definition-a Debit Note is a document which is made out by the seller whenever the purchaser has been undercharged on an invoice, or when it is necessary to make some charge on a debtor which increases the latter’s debt. Suppose that an invoice has been sent to a purchaser of a typewriter value Rs. 8000, but by mistake the typist has typed Rs. 800 as the purchase price.

Clearly the seller will want to correct this undercharge, but another invoice would not be appropriate since no ‘goods’ are being delivered. A debt note for Rs. 7200 treated exactly like an invoice and put through the Day Book in exactly the same way as an invoice will put his matter right.

In the same way, charger for carriage or insurance, which are not know at the time invoice was made out, can .be charged to the debtor by means of a Debit Note.

Insurance

1. Life, Fire Marine and Accident

A contract, of Insurance is a contract between the assured on the one side and the underwriter on the other, by which the latter, in consideration of a payment paid by the former, undertakes to indemnify, the insured against any loss arising from a contingency up to the sum agreed upon.

It is a contract of indemnity, i.e., its purpose is to compensate for a loss and not to make profit.

2. Fundamental Principles of Insurance

The following are briefly, the important principles applying to the insurance contracts: –

(i) The principle of contribution which is a corollary of the doctrine of indemnity, assures that once the insured recovers the full amount of his actual loss form one insurer, he cannot recover it again from another.

(ii) Another fundamental is that the rise covered should be spread over a larger number of policy-holders as the basis principle of insurance is to spread the risk and the probable loss is estimated on the basis of the law of average.

(iii) The essence of contract of insurance is that it is a contract of indemnity, i.e. it ought not be entered into for a mere wager, or speculation, but only with a view to provide against the actual monetary loss which the insured is likely to suffer through the happening of the contingency under contemplation. If, for example, a person insures his building against loss by fire for an amount higher than the actual value of the building, he cannot in case of destruction of the building recover more than the actual value of the building.

On the same principle, in the case of a person insuring property which does not belong to him, or in which he has no pecuniary interest either as a creditor or in any other capacity, the insurance contract cannot be enforced for want of insurable interest.

(iv) The other peculiarity of a contract of insurance is that it is said to be contract field, i.e. a contract of absolute good faith, and the duty is thrown by law upon the insured do make full and fair disclosure of every material fact that is likely to affect the judgment of the underwriter or insurance company in deciding what premium to charge or whether to enter into the contract at all.

Thus any wrong disclosure or any statement made fraudulently, negligently, or even innocently through want of knowledge may vitae the contract.

(v) The insured must have an insurable interest in the subject matter of insurance. Insurable interest means such an interest in the subject matter that loss or damage to it would result in the insured suffering a pecuniary loss, that is, a loss that can be measured in terms of money.

(vi) The principle of subrogation is another corollary of the indemnity principle. It provides that once the insured is compensated for his loss, the insurance company steps into his shoes and enjoys all the rights the insured had against third parties.

3. Nationalisation of General Insurance

General Insurance business in India dates back to 260 years ago. The 106 general insurance companies, including 42 foreign owned ones, with assets aggregating Rs. 240 crores, have been taken over by nationalisation. This nationalisation was however, anticipated by the insurance companies as is evident from the decline between 1968 to 1969 of foreign companies from 52 50 42 and Indian companies from 72 to 64. By a Presidential Ordinarily insurance companies-Indian and foreign-wire taken over by the centre and a comprehensive bill nationalizing insurance companies is to be introduced in the next session of Parliament thereafter. A separate corporation is proposed to be set up to manage the nationalised general insurance business and in the meantime, custodians would be appointed to manage the companies. Unlike as in case of Life assurance business, four corporations competing with each other for business all over India are proposed to be constituted so that performance of the individual corporations could be judged objectively and the public be given a choice of placing their insurance with the corporation which provided the best service.