Journal Entry for Insurance Claim

by mmm
(Dubai)

Dubai

Dubai

Q: What is the entry for the claim recovered from fire insurance?

A:
This depends on the exact asset/s that were destroyed in the fire and to what extent they were covered.

1) Let's say a storeroom and its contents, valued at $60,000, were destroyed by fire. The insurer pays your business $60,000.

In this case the entry would be:
Dr Insurer (debtor) $60,000
Cr Storeroom (asset) $60,000

Later:
Dr Bank $60,000
Cr Insurer (debtor) $60,000

2) Now let's say the agreed amount of the claim was $50,000 instead of $60,000.

The journal entry would be:
Dr Insurer (debtor) $50,000
Dr Loss $10,000
Cr Storeroom (asset) $60,000

Later:
Dr Bank $50,000
Cr Insurer (debtor) $50,000

In this second scenario we record the loss (the difference between the value of the asset lost and the amount of the claim) of $10,000.

For asset/s that were destroyed that were subject to depreciation, one would take out the accumulated depreciation account too.

3) A delivery vehicle, which had a cost of $10,000 and accumulated depreciation of $3,000, was destroyed by fire. The insurance claim amounted to $5,000.

The entries would be:
Dr Insurer (debtor) $5,000
Dr Accumulated depreciation $3,000
Dr Loss $2,000
Cr Delivery vehicle (asset) $10,000

Later:
Dr Bank $5,000
Cr Insurer (debtor) $5,000

Comments for Journal Entry for Insurance Claim

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Entry For Difference in Loss By Fire And Partial Insurance Claim Received
by: Anonymous

If a company bear losses of assets and stock by fire 500,000 Rupees for Stock And 2,000,000 Rupees for assets but company received only 300,000 Rupees for stock and 1,500,000 for assets what would be the relative entries in P& L and Balance Sheet of the company in the year when loss is incurred and supposing the insurance claim is received in the next FY?

A: If during the first financial year they already expect to receive the insurance claim for 1,800,000 total, they can record a receivable for this amount.

First financial year:

Dr Insurance receivable 1,800,000
Loss 700,000 (2,000,000 + 500,000 - 1,800,000)
Cr Stock 500,000
Cr Assets 2,000,000

2nd year:

Dr Bank 1,800,000
Cr Insurance receivable 1,800,000

If they were not sure in that first year if they were going to receive any insurance then they would record the full loss in that year. And the next year they would record it as an income.

First financial year:

Dr Loss 2,500,000
Cr Stock 500,000
Cr Assets 2,000,000

2nd year:

Dr Bank 1,800,000
Cr Insurance received (income) 1,800,000

Hope that makes sense.

Entry For Difference in Loss By Fire And Partial Insurance Claim Received
by: Teekam Rai

If a company bear losses of assets and stock by fire 600,000 Rupees for Stock And 2,000,000 Rupees for assets but company received only 300,000 Rupees for stock and 1,400,000 for assets what would the entry be?

Kindly E-mail me at teekamrai@yahoo.in

journal
by: Anonymous

when insurance campany addmitted the claim and only pay half of money

Received Compensation
by: Anonymous

what is the journal entry for receiving the compensation?

for example:
I have purchased the car 36,000, during the transport between the car factory to my garage.

the transporter has crashed my new car and have been written off.

we have received the compensation from the transport company 39,250.

so we have profit of 3,250

how do I treat the journal for sage?

Regards
Liz

what if there is no insurance claim
by: Anonymous

i want to know the journal entry for the loss by accident of lets say $1000 and there is no insurance at all.

service insurance claim
by: Anonymous

how to made entry for part service amount paid by customers another part amount paid by insurance company

Insurance Claim by employee
by: Anonymous

Hello..
what if the employee was injured and requested for compensation. the company has forwarded the compensation claim to the insurance company.
is there any journal entry? and if yes what is the journal entries...

periodic inventory
by: Anonymous

But what do we do under periodic inventory system? Say, an insurance claim is receivable against a loss of inventory by fire. I debit insurance claim receivable, which account do I credit???? I cannot credit inventory as I will just record closing balance in P&L. Please help

A: Credit Income or gain (Insurance recovered)

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