Fire Insurance Claims and Stock Salvage Analysis
Learn about fire insurance claims process and salvaged stock in case of a business fire incident. Follow steps to prepare the statement of fire claim for an insurance company based on stock information. Calculate gross profit percentage to determine losses accurately.
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Associate Professor, Department of Commerce Shri Hurkadli Ajja Shikshana Samiti s Smt. K. S. Jigalur Arts and Dr. (Smt.) S. M. Sheshgiri Commerce College for Women , Dharwad
UNIT UNIT - - 5 5 FIRE INSURANCE CLAIMS FIRE INSURANCE CLAIMS MEANING MEANING: : Fire insurance is a contract of indemnity under which in consideration of the premium paid, the insurer undertakes to reimburse the insured for any loss incurred on happening of an uncertain event. It is a claim amount given to the business man when there is a fire occurred in the business premises.
STEPS 1. Preparation of TradingAccount Gross Profit 2. Gross Profit Percentage = Gross Profit X 100 Net Sales 3. Preparation of Memorandum Trading Account Value of closing stock on the date of fire 4. Preparation of Statement - Fire ClaimAmount
SALVAGED STOCK SALVAGED STOCK Salvaged stock means the stock saved from fire. It is a stock left out after fire. The salvaged stock is usually retained by the insured at an agreed value.
PROBLEM PROBLEM - -1 1 Fire occurred in the business premises of a trader on 1-7-2019 and the entire stock was destroyed. However, the books and records were saved and the following information was obtained: 1. Stock on 31-12-2017 2. Stock on 31-12-2018 3. Purchases for the year ending 31-12-2018 4. Sales for the year ending 31-12-2018 1,00,000 5. Purchases from 1-1-2019 to 30-6-2019 37,000 6. Sales from 1-1-2019 to 30-6-2019 60,000 Prepare the statement of fire claim to be presented to the insurance company. 35,000 40,000 80,000
TRADING ACCOUNT Particulars Amount Particulars Amount To Opening Stock 35,000 By Sales 1,00,000 To Purchases 80,000 By Closing Stock 40,000 To Gross Profit 25,000 ( B/F) 1,40,000 1,40,000
Gross Profit Percentage = Gross Profit X 100 Net Sales = 25,000X 100 1,00,000 = 25%
MEMORANDUM TRADING ACCOUNT Particulars Amount Particulars Amount To Opening Stock 40,000 By Sales 60,000 To Purchases 37,000 By Closing Stock 32,000 To Gross Profit 15,000 (B/F) (Value of Stock on the date of Fire) 25 X 60,000 100 92,000 92,000
STATEMENT OF FIRE CLAIM STATEMENT OF FIRE CLAIM Particulars Amount Value of Stock on the date of Fire 32,000 Less: Salvaged Stock ------ Amount of Fire Claim 32,000
PROBLEM PROBLEM - - 2 2 AFire occurred in the premises of Cotton Stores on 31-12-2016. Stock was destroyed and salvaged stock was Rs. 4,500. The following data available from the books: Stock on 1-1-2016 34,500 1. Sales for the year 2016 1.92,000 2. Purchases for the year 2016 1,26,000 3. During the past five years the average gross profit o sales was 25%. Prepare a statement showing the amount of claim.
MEMORANDUM TRADING ACCOUNT Particulars Amount Particulars Amount To Opening Stock 34,500 By Sales 1,92,000 To Purchases 1,26,000 By Closing Stock 16,500 To Gross Profit 48,000 (B/F) 25 X 1,92,000 100 (Value of Stock on the date of Fire) 2,08,500 2,08,500
STATEMENT OF FIRE CLAIM STATEMENT OF FIRE CLAIM Particulars Amount Value of Stock on the date of Fire 16,500 Less: Salvaged Stock 4,500 Amount of Fire Claim 12,000
PROBLEM PROBLEM - -3 3 A Fire occurred in the premises of Ishwar and company limited on 1-9-2016 and the stock of thee value of Rs. 1,01,000 was salvaged and the business books and records were saved the following information was obtained: Stock for the year 31-3-2016 6,80,000 1. Sales for the year 31-3-2016 11,00,000 2. Purchases from 31-3- 2016 to 1-9-2016 2.50,000 3. Sales from 31-3- 2016 to 1-9-2016 3,60,000 4. Stock on 31-3- 2015 3,00,000 5. Stock on 31-3- 2016 3,40,000 6. The stock on Stock on 31-3-2016 was over valued by Rs. 20,000. In April 2016 the selling price was lowered by 10%. Calculate the amount of claim.
TRADING ACCOUNT Particulars Amount Particulars Amount To Opening Stock 3,00,000 By Sales 11,00,000 To Purchases 6,80,000 By Closing Stock 3,20,000 To Gross Profit 4,40,000 ( B/F) 1,40,000 1,40,000
