Question

22. A fire broke out in a business on 1st February, 2019. A comprehensive insurance policy for Stoc
Building, Furniture and Loss of Profit was taken. The dislocation period was 3 months. Clair
accepted by insurance company were : * 1,05,000 for Stock Destroyed; 9,000 for Stock Damage
16,500 for Furniture, * 18,000 for Building Repairs Charges and Claim for Loss of Profit 3 21,00
From the following information, pass necessary journal entries and prepare related accounts in th
books of business :
Stock in the premises of Business on the date of fire 3,50,000.
Cost of Stock Destroyed * 1,20,000 (+ 6,000 being salvaged therefrom)
Cost of Stock Damaged * 90,000 which was valued at $ 75,000.
Furniture (Book-value) 15,000 (Cost 25,000).
Building damages repaired at an expense of * 21,000.
Actual Loss of Profit 27,000.
Date of preparation of final accounts : 31st March, 2019
(Answer : Claims received from Insurance Comprill; ? 1,69,500.]
Riva closes her books of accounts on 31st March
23.​

Answer 1

Answer:

To account for the loss, you record the dollar amount of the damage and reduce or write-off the asset. For example, if $9,000 of inventory is damaged in a fire, record the loss as a $9,000 debit to Fire Loss, and a $9,000 credit to Inventory.