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This is how we've always done it. Treat it like a transfer into a "fund" and then post a gain/loss to get back to the ending cash value.

I've seen it done both ways, neither of which, IMO, are correct. I see the insurance as just another asset of the plan, so the premium itself is a purchase of a (different) asset, not directly reportable on the income statement. It will almost surely be worth a lot less at the end of the year than the premium, and that difference would show up as a loss in the other income line. If the purchase of a policy or annuity is a transfer of liabilities to the insurance company then I think it might be a benefit paid. We never do that so I'm not sure.