Journal Entry for Fire Insurance Claim

The journal entry for the given scenario can be recorded as follows:

Date | Particulars | L.F. | Debit (Rs.) | Credit (Rs.)
--- | --- | --- | --- | ---
- | Fire Insurance Claim A/c | Dr. | 900 | -
- | Loss by Fire A/c | Dr. | 600 | -
- | Scrap Realization A/c | Dr. | - | 200
- | To Goods A/c | Cr. | 1500 | -

Explanation:

The above journal entry is passed to record the fire insurance claim of Rs. 900, the loss of goods worth Rs. 1500, and the scrap realization of Rs. 200.

1. Fire Insurance Claim A/c Dr. 900

This account is debited to record the amount of claim received from the insurance company. As the insurance company has admitted the claim of Rs. 900, it is recorded as a debit to the Fire Insurance Claim A/c.

2. Loss by Fire A/c Dr. 600

This account is debited to record the loss of goods worth Rs. 1500, out of which only Rs. 900 is recoverable from the insurance company. Hence, the balance amount of Rs. 600 is recorded as a debit to the Loss by Fire A/c.

3. Scrap Realization A/c Dr. 200

This account is debited to record the amount realized from the scrap of the goods destroyed by fire. As Rs. 200 is realized from the scrap, it is recorded as a debit to the Scrap Realization A/c.

4. Goods A/c Cr. 1500

This account is credited to record the original cost of the goods destroyed by fire. As the goods are destroyed, the value of the goods is transferred to the Loss by Fire A/c. Hence, the Goods A/c is credited for the total value of the goods destroyed, i.e., Rs. 1500.

Conclusion:

The above journal entry is passed to record the fire insurance claim, the loss of goods, and the scrap realization in the books of accounts. By passing this entry, the accounting records are updated, and the financial position of the company is correctly reflected in the financial statements.