Journal Entry: Goods Lost and Insurance Claim

How to make journal entry for goods lost and insurance claim

Sometime, it may be possible to goods lost by fire, theft or other natural disaster. Insurance claim can be claimed for insured goods.

In the business, it is possible to goods (stock, merchandise and inventory) may loss by fire, theft or burglary.

Sometimes it may loss by accident while dispatching the goods.

This loss is abnormal loss in nature.

If goods are not insured, it is total loss to organization.

This loss is deducted from purchase of goods and debited in profit and loss account.

If goods are insured, insurance company accepts this loss.

Organization receives compensation from insurance company.

Sometimes, insurance company does not accept claim if there is suspicious circumstance.

There are three alternative solutions for goods lost by fire. They are:

1.    Goods lost but not insured, there is total loss.

2.    Goods lost but insurance company paid partial claim, there is partial loss.

3.    Goods lost and insurance company accepted full claim, there is not any loss.

Goods Loss and Insurance Claim

Journal Entry

In the book of …………

#######

#####

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Currency of your country  

PROBLEM: 17

TS Traders has following extracted transactions:

(a) Goods loss by fire Rs 25,000.

(b) Goods loss by fire Rs 35,000 but insurance company accepted claim only Rs 15,000.

(c) Goods loss by fire Rs 40,000 insurance company does not accepted any claim.

(d) Goods loss by fire Rs 50,000 and insurance company accepted full claim.

(e) Goods loss by fire Rs 60,000 insurance company accepted only 60% claim.

(f) Goods loss by theft Rs 5,000.

Required: Journal entries

SOLUTION:

Journal Entry for American Style

Journal Entry for European Style

Journal Entries

In the book of TS Traders

Keep in Mind (KIM)

###########

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Currency of your country  

PROBLEM: 17

The following extracted information is available:

Goods worth Rs 50,000 were destroyed by fire.

Goods of Rs 36,000 lost by theft but the company refused the claim due to suspicious circumstance.

The insured stock was lost by fire Rs 50,000 but the company admitted a claim of Rs 35,000 only.

Goods worth 22,000 lost by fire insured and the company admitted the full claim.

Required: Journal entries

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