insurance claim of capital asset

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

10 April 2011 PVT LTD COMPANY GAVE ITS CAR FOR SERVICING.SMALLER PARTS OF DIFFERENT VALUES LIKE 500,1000 ETC WERE DAMAGED WHICH ACCUMULATED TO TOTAL DAMAGE OF 11000.COMPANY CLAIMED INSURANCE AND GOT RS 9000 .WHAT WILL BE ITS ADJUSTMENT?WILL IT AFFECT ITS CAR VALUE IN BOOKS(PARTS ARE OF IRRELEVANT VALUE AS STATED ABOVE)?WHAT WILL BE ENTRY PASSED FOR INSURANCE CLAIMED AND AMOUNT RECIEVED?

CA SAURABH GARG

CA SAURABH GARG (Expert)
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10 April 2011 No, the amount received against car damege will not be treated as capital revenue.

If the car completely destroyed or damaged majorly which can not use futher, only then amount received from insurance company will be treated as consideration of car and amount will be adjusted with the cost of car and car will be treated as sale of car and will deleted from the fixed assets register.

But in your case expenditure of repair will be treated as car repair and maint. debited to Profit and loss Account and amount received from insurance company will adjusted with the expenditure bear by company.

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Querist : Anonymous

Querist : Anonymous (Querist)

10 April 2011 WIIL THE COMPANY REQUIRED TO PASS JOURNAL ENTRY WHILE CLAIMING AMOUNT FROM INSURANCE COMPANY?