journal entry for
insurance claim for goods lost by fire costing rs. 50,000
Answers
Answer:
insurance A/C........dr
To sales A/C
Answer:
(refer to the attachment if you can't see the typed answer properly...)
Particulars Dr. Cr.
Loss due to fire A/c - Dr 50,000
To Purchases A/c 50,000
Insurance Co's A/c - Dr 50,000
To Loss Due to fire A/c 50,000
Bank or Cash A/c - Dr 50,000
To Insurance Co's A/c 50,000
Explanation:
Note: I am assuming that the insurance company will give the full amount to the business as nothing about that has been mentioned in the question.
Amount of goods lost by fire = Rs. 50,000
Goods are damaged. This means that our stock will decrease. Stock is an asset and decrease in asset is credited. So, we'll credit the purchases account.
Also, loss due to fire is a loss for the business and increase in expenses or losses is debited. So, loss due to fire a/c will be debited.
a.)
Loss due to fire A/c - Dr 50,000
To Purchases A/c 50,000
Now, a claim for insurance will be lodged with the insurance company. This will make the insurance company our debtor.
Debtors are our assets and increase in assets is debited.
b.)
Insurance Co's A/c - Dr 50,000
To Loss Due to fire A/c 50,000
When we receive the payment by the insurance company:
c.)
Bank or Cash A/c - Dr 50,000
To Insurance Co's A/c 50,000
