Question

1) Pass the journal entry for followings...
a) Goods of Rs. 2000 destroyed by fire, for which insurance company has admitted claim of Rs. 1500.
Realized Rs. 200 from goods burnt by fire.​

Answer 1

Answer:

When goods are destroyed by fire, then the "Loss by fire A/c" is debited and "Purchases A/c" is credited. The goods destroyed by fire is considered to be loss for the business and is classified as a nominal account. Therefore, according to the rule of nominal account, all the expenses and losses are to be debited. Hence, "Loss by fire A/c" is debited when goods are destroyed by fire and "purchases A/c" is credited.