Insurance compensation received what is the treatment ???

@ Celiena

There is no Accounting Standard which is prescribing anything regarding the recognition of Insurance claims on the CR side of ur P&L A/c.

So i think crediting in the P&L a/c is not the correct treatment.

ya agree with Celiena goel .. it shoud credit in p/l a/c...

Dear All,

If we show expenses on debit side of P&L and compenastion recd on Cr side, then it will be difficullt for the reader of the accounts to understand and correlate these two offsetting items. So, in my view, compensation should be shown as a deduction from the total expense incurred as a result of earthquake and only the net amount should appear in the outer column, in order for simple and better presentation.

Other views are welcome.

Regards, Uttam

The following would be a better representation:

1.Identify the total expenditure on repair etc, against the claim and show it as receivable amount by credit  to concerned Expenditures and debit to receivable a/c.

2 Creit  the amount received to the receivable a/c.

3.Balance left in the Receivable a/c is loss(short claim received) or profit (higher claim received) depending on the amount received.

Hope the position is clear.

kkm

As per AS-5