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Goods costing Rs.8,000 were destroyed by fire. Insurance company accepted a claim of Rs.5,000. The amount to be credited to Purchases / Trading A/c will be___
- a)Rs.5,000
- b)Rs.8,000
- c)Rs.3,000
- d)Rs.13,000
Correct answer is option 'B'. Can you explain this answer?
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Goods costing Rs.8,000 were destroyed by fire. Insurance company accep...
The correct answer is option 'B' i.e. Rs.8,000.
Explanation:
When goods worth Rs.8,000 were destroyed by fire, the loss incurred by the business is Rs.8,000. However, the insurance company accepted a claim of Rs.5,000, which means that the business will receive Rs.5,000 as compensation for the loss incurred.
Now, the entry to record the loss of goods by fire and the receipt of compensation from the insurance company will be as follows:
Loss A/c Dr. Rs.8,000
To Purchases / Trading A/c Rs.8,000
(Being the loss of goods by fire recorded)
Bank / Insurance Co. A/c Dr. Rs.5,000
To Loss A/c Rs.5,000
(Being the compensation received from the insurance company recorded)
From the above entries, we can see that the amount to be credited to Purchases / Trading A/c is Rs.8,000, which is the cost of the goods destroyed by fire. Therefore, option 'B' is the correct answer.
Explanation:
When goods worth Rs.8,000 were destroyed by fire, the loss incurred by the business is Rs.8,000. However, the insurance company accepted a claim of Rs.5,000, which means that the business will receive Rs.5,000 as compensation for the loss incurred.
Now, the entry to record the loss of goods by fire and the receipt of compensation from the insurance company will be as follows:
Loss A/c Dr. Rs.8,000
To Purchases / Trading A/c Rs.8,000
(Being the loss of goods by fire recorded)
Bank / Insurance Co. A/c Dr. Rs.5,000
To Loss A/c Rs.5,000
(Being the compensation received from the insurance company recorded)
From the above entries, we can see that the amount to be credited to Purchases / Trading A/c is Rs.8,000, which is the cost of the goods destroyed by fire. Therefore, option 'B' is the correct answer.
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Goods costing Rs.8,000 were destroyed by fire. Insurance company accepted a claim of Rs.5,000. The amount to be credited to Purchases / Trading A/c will be___a)Rs.5,000b)Rs.8,000c)Rs.3,000d)Rs.13,000Correct answer is option 'B'. Can you explain this answer?
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