Accounting treatment for Fire Loss

1) ENTRY FOR LOSS

GOODS LOSS BY FIRE A/C DR                      1000

                    TO TRADING A/C                                                  1000

2) ENTRY FOR INSURACE CLAIM.

INSURACE CLAIM A/C DR                             800

P& L A/C   (LOSS)         DR                             200

                    TO GOODS LOSS BY FIRE A/C                          1000

3.ENTRY WHEN CLAIM RECEIVED BY THE INSURANCE COMPANY

CASH A/C DR                                                800

                  TO INSURANCE CLAIM A/C                                 800.

Agree with SAN

agree with san

So, What will be the Gross equation in this case...?,

As per my opiinion it should be Gross Profit=Sales+Closing Inventory-Opening Inventory - Purchase(Less Return)

 

Loss by Fire A/c is Debited and Purchases A/c is credited. The goods destroyed by fire is a loss for the business and is considered in the Nominal Account. Hence according to the rules of Nominal Account, the expenses and losses are debited. Therefore the loss by fire is debited in the Journal Entry. 

Hope this answer helps!