Question

Goods destroyed by fire worth 1000 and insurance company claims 800 in full settlement of the claim

Answer 1

Answer:

Impairment loss 1000₹

To inventory 1000₹

(Initial recognition)

Cash account 800₹

To insurance claim 800₹

(Insurance claimed)

Impairment loss 200₹

To inventory 200₹

(Final recognition of loss on inventory)

Or

Dr Insurer (debtor) $800

Dr Loss $200

Cr Storeroom (asset) $1000

And later:

Dr Bank $800

Cr Insurer (debtor) $800