What will be the journal entry for good lost by fire. How
many entries will be passed in the books of account for the
same.
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Answer Posted / puneet sharma
Loss by fire (Ex;Rs.10,000) reducing our purchases of goods, entry will be:
Loss by fire a/c Dr. 10,000 (debit the exp)
To Purchase a/c 10,000
Now, this loss needs to be set off in P&L:
P&L a/c Dr. 10,000
to Loss by fire a/c 10,000
In case, there is insurance company pays Rs. 6000, then entry would be:
Cash a/c Dr. 6,000
To Ins. comp a/c 6,000
Now, Insurance comp. accounts need to be set off against P&L and this would show up in credit side of P&L account.
Insurance comp a/c Dr. 6,000
To P&L a/c 6,000
So, the ultimate loss was Rs.4,000 (10,000-6,000)
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