1.A sells goods to B for 10000(sales entry made ,no taxes involved).Later goods failed to pass tests conducted by buyer's country govt. officials and rejected.
2.Insurance company compensates full invoice value to seller i.e 10,000.
3.Seller sells rejected goods on behalf of insurance company to other party and pays salvage value to the company.
Please advice the best way to pass journal entries.
Debtors a/c
To Sales a/c
then when goods are rejected
Loss on sold goods 10,000
Bank a/c 1000
To returned goods sales 1000
To Debtors a/c 10000
when goods are sold and you have insurance policy purchased for 100₹
Prepaid insurance a/c
To Bank a/c
when you claimed for whole goods,
Debtors/Receivables a/c 10000
To Insurance claim a/c 10000
next, after you received the claim
Bank a/c 10000
To Debtors/receivables a/c 10000
im not sure if how to compensate insurance company in return, but probably it’s like
Bank a/c 1000
To Returned goods sale 1000
(this is included above)
Thank you for your reply
CAclubindia
