An asset whose written down value (cost less depriciation) in the books of the firm is zero. However the asset is very much in use and this asset gets destroyed by fire. The firm lodges its claim with the Insurance co. for the said asset at 100000/-.
What will be the accounting entry for :
1) Loss of the asset by fire ?
2) Insurance claim lodged/ receivable ?
The firm later on replaces the destroyed asset by purchase of a new asset whose cost is 150000/-.
What will be the accounting entry for the new asset purchased vis-a-vis the lost asset?
2007-10-19 21:54:56 · 7 answers · asked by happy 2 in Business & Finance ➔ Other - Business & Finance
Since the asset is destroyed, you have to remove it from the books. Since the nbv is zero, the cost must be equal to the accumulated depreciation.
Dr Accd depn xxx
Cr Asset at cost xxx
Assuming the insurance co. agrees to pay you 100,000,
Dr Insurance claim receivable 100,000
Cr Insurance claim income 100,000
When you purchase the new asset,
Dr New asset at cost 150,000
Cr Cash/A/cs payable 150,000
2007-10-20 00:12:22 · answer #1 · answered by Sandy 7 · 0⤊ 0⤋
The book value of the asset is zero and therefore there need not to pass any book entry.
Machinery A/c Dr. 150000
Bank A/c Cr 150000
(cost of machinery purchased)
Book value of the machinary is zero therefore no need to pass any entry for loss of the asset by fire.
No entry for claim lodged/receivable during the year. Simply a note mentioning the lodgement of claim should be added in notes on account.
When the claim will be settled the amount recieved will be credited to profit and loss account.
On recei
2007-10-20 05:55:07 · answer #2 · answered by vinayak g 5 · 0⤊ 0⤋
I think the answer for 1) loss of the asset by fire
Debit to Acc. Depreciation - xxx
CR. Asset (at acq. cost) xxx
to take out the cost and acc. depreciation in the books of the company due to fire.
2) Insurance claim, the entry would be:
Dr. Insurance Receivable 100,000
Cr. Miscellaneous Income (100,000)
to record the claim from insurance
3) Asset purchased worth 150,000, entry then be:
Dr. Assets 150,000
Cr. Cash (150,000)
to record purchase of asset.
2007-10-20 05:49:26 · answer #3 · answered by KRISTOFF 2 · 0⤊ 0⤋
Answer:-
1. Set off the Intial Value with Accrd Depr. :-
Dr. Accrd Depr xxxx
Cr. Machinery xxxx
2. Misc. Income on Insurance Claim : -
Dr. Insurnance Receivable 100,000
Cr. Misc. Income on Insurance Claim 100,000
3. Acquisition of new Asset : -
Dr. Machinery A/c 150,000.00
Cr. Cash/Vendor 150,000.00
Just Simple.......
2007-10-20 09:16:07 · answer #4 · answered by bala 1 · 0⤊ 0⤋
I am not sure any have I answer.
the book value of the asset is zero - treated as scrap and the income from the scrap asset (i.e., insurance claim) is miscellaneous income from the scrap asset. Entry for new asset as usual purcahse of new asset.
2007-10-20 05:18:16 · answer #5 · answered by martins 2 · 0⤊ 0⤋
Dr insurance claim lodged / receivables
Cr revenue
Dr cash
Cr insurance claim lodged / receivables
2007-10-20 17:07:03 · answer #6 · answered by Dsalah s 3 · 0⤊ 0⤋
Receipts from insurance co. will be income.
New assest will be fresh entry.
2007-10-20 05:26:19 · answer #7 · answered by Anonymous · 0⤊ 0⤋