Goods worth Rs 3,00,000 were burnt by fire and claim of Rs
1,80,000 has been accepted by the insurance company. How it will be recorded in final accounts?

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Solution

Rs 3,00,000 will be deducted from purchases on the debit side of trading account, Rs. 1,20,000 will be shown on the debit side of profit and loss account, and Rs. 1,80,000 will be shown on the assets side of the balance sheet.

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From the following trial balance prepare trading account, profit and loss account, and balance sheet for the year ended 31st December, 2016.

$\begin{matrix} Account Title & Amt. (Rs.) & Account Title & Amt. (Rs.) Capital & 10, 00, 000 & Sundry Creditors & 97, 000 Life Insurance Premium & 8, 000 & Sales & 12, 00, 000 Plant and Machinery & 2, 50, 000 & Returns Outwards & 10, 000 Stock in the Beginning & 1, 50, 000 & Discount (Dr.) & 8, 000 Purchases & 8, 72, 000 & Discount (Cr.) & 12, 000 Return Inwards & 20, 000 & Rent or Premises Sublet & 10, 000 Sundry Debtors & 2, 10, 000 & Lighting & 5, 000 Furniture & 92, 000 & Salaries & 2, 13, 000 Freehold Property & 4, 00, 000 & Cash & 1, 58, 000 Freight and Duty & 20, 000 & Loan from Bank at 10 % per annum on Carriage Inwards & 8, 000 & 1.1.2016 & 1, 00, 000 Carriage Outwards & 2, 000 & Bank Interest (Dr.) & 9, 000 Trade Expenses & 4, 000 \end{matrix}$

Adjustments:

(i) Stock on 31st December, 2016 was valued at Rs. 3,00,000.

(ii) Stock for Rs. 50,000 was burnt by fire on 25th December, 2016 and the Insurance company admitted the claim of Rs. 30,000.

(iii) Good worth Rs. 15,000 were distributed as free samples, goods worth Rs. 12,000 were used for personal purposes by the proprietor and goods worth Rs. 8,000 were given away as charity.

(iv) Use of goods in business worth Rs. 20,000.

(v) Machine worth Rs. 50,000 burnt by fire on 30th December, 2016 which was not insured.

Q. Full claim accepted by insurance Company on the loss of goods by fire is credited to ____________ A/c.

Sigma Ltd. took insurance cover of Rs. 3, 00,000 from company A and Rs. 7, 00,000 from company B, against the goods lying in the godown. Later goods were damaged due to fire and the loss was estimated at Rs. 1, 50,000.

(a) How much amount will be paid by Company A and B respectively to compensate Sigma Ltd?

(b) State and explain the underlying principle.

Mr. A is the accountant of a company ABC ltd. Goods worth Rs 20,000 have been purchased of which goods worth Rs 2,000 are found to be obsolete & were sent back, but the same was not communicated to the accountant by the store manager of the company separately. rather he put a note at the back of the goods receipt slip. The accountant of the company recorded the value of goods at Rs 20,000 in the books of accounts. Which step of accounting process has gone wrong in the above situation?

Q. An insurance claim of Rs. 300 was accepted in respect of stock of Rs. 500, which was destroyed by fire, Rs.200 not covered by insurance should be debited to ______________.

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Goods worth Rs 3,00,000 were burnt by fire and claim of Rs 1,80,000 has been accepted by the insurance company. How it will be recorded in final accounts?

Rs 3,00,000 will be deducted from purchases on the debit side of trading account, Rs. 1,20,000 will be shown on the debit side of profit and loss account, and Rs. 1,80,000 will be shown on the assets side of the balance sheet.

Goods worth Rs 3,00,000 were burnt by fire and claim of Rs
1,80,000 has been accepted by the insurance company. How it will be recorded in final accounts?