Our company is in to foodstuff trading. We have taken rejection insurance for goods. In some cases customers reject goods due to lab test failure in their country. Insurance company would settle us the full value of the invoice.Later on we resell these goods on behalf of the insurance company and pay salvage value to the insurance company.Please comment if the following entries are right.
| On sale | Customer Dr |
| To sales | |
| On rejection by customer | Sales return Dr |
| To customer | |
| Loss booking | Loss of goods Dr(expense) |
| To sales return | |
| Claim Approval | Insurance company Dr (Receivable) |
| Insurance claim (Other income) | |
| Claim receipt | Bank Dr |
| To insurance company | |
| Later on sell goods to another party and pay salvage value to Insurance company | |
| On selling on behlf of Insurance co. | Purchase Account Dr |
| To Insurance company | |
| Salvage payt to Ins.Co. | Insurance company Dr |
| To Bank | |
| Thanking you in advance for expressing your views | |
CAclubindia
