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aman garg (student) (31 Points)

17 March 2014

why sale of previous year immediately the date of fire is used in finding Gross profit in insurance claim for loss of profit?

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6 Replies

CA Saroj Kumar (Keen to learn something new every moments) (2588 Points)
Replied 18 March 2014

dear if u have to come at conclusion at any future uncertain point how u will decide it.....definetely u will do it on the basis of ur previous experience, just likt tht if u have to find out how much sale may be there if no fire is broke out. ..hence we taking gross sale or emmediately before fire.

aman garg (student) (31 Points)
Replied 18 March 2014

Thanx but why sale immediately preceeding the date of fire. why not use previous financial year sale .

CA Saroj Kumar (Keen to learn something new every moments) (2588 Points)
Replied 18 March 2014

post a practical question i will give u with explanation.

aman garg (student) (31 Points)
Replied 18 March 2014

Fire occured in A ltd.on 1 august 2013 Indemnity peruod of 3 months. dislocation period sale 30000 sale corresponding to dislocation period in last year 50000. last financial year sale 100000 sale immediately preceeding the date of fire is 150000 insured standing charges 10000 trend is of increase in sale by 2 percent gross profit ratio is 20 percent

CA Saroj Kumar (Keen to learn something new every moments) (2588 Points)
Replied 18 March 2014

dear as i know when u r going to make benchmark for future u hve to take base of previous year. but here the situation is quite different we taking sale of immediately to fire bcs we hve actual sale figure in spite of taking previous year sale we prefer to take actual sale. And to arrive actual loss ee should compare with actual sale if known. instead if we dont know the sale figure then for the purpose of base we will take previous year.