Question

Stock of Rs.4,000 is destroyed by fire, It was not insured, The accounting entry is ________________.

• A. Stock A/c Dr. 4,000 Trading A/c Cr. 4,000
• B. P and L A/c Dr. 4,000 Trading A/c Cr. 4,000
• C. Stock A/c Dr. 4,000 P/L A/c Cr. 4,000
• D. Trading A/c Dr. 4,000 Stock A/c Cr. 4,000

Answer 1

The correct option is B P and L A/c Dr. 4,000 Trading A/c Cr. 4,000

Stock is an item of trading account, hence in case of loss of stock, stock need to be reduced. Hence the loss of stock due to fire which was not insured is a complete loss to the business.

Following accounting entry will be passed:

Profit & Loss A/c Dr. 4000

To Trading A/c 4000