Goods costing ₹10000 was destroyed by fire on 30th march 2017. Insurance company accepted the claim to the extent of 60% and the claim was recieved on 10th April 2017. How will it appear in Trading and Profit & Loss Account and Balance Sheet on 31st March 2017 ?
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1) ENTRY FOR LOSS
GOODS LOSS BY FIRE A/C DR 10000
TO TRADING A/C 10000
2) ENTRY FOR INSURACE CLAIM.
INSURACE CLAIM A/C DR 6000
P& L A/C (LOSS) DR 4000
TO GOODS LOSS BY FIRE A/C 10000
3.ENTRY WHEN CLAIM RECEIVED BY THE INSURANCE COMPANY (on 10.4.17)
CASH A/C DR 6000
TO INSURANCE CLAIM A/C 6000
so on 31.3.17
your Trading A/C is reduced by 10000
your p/L is also reduced by 4000
and your balance sheet shows an asset of 6000 i.e insurance claim.
Since we actually receive the insurance claim on 10.4.2017 and not by 31.03.2017, what is the reason that insurance claim is shown on balance sheet on 31st march ?