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Loss of stock

Abnormal loss of stock: When the goods are destroyed due to fire, the value of stock lost has to be ascertained first, thereafter ‘Abnormal Loss account’ is debited and Trading Account is credited.

 

If the amount of loss is fully insured

In this case, Insurance Company account will be debited with the amount due and Abnormal Loss account will be credited.
 



If amount of loss is partly insured

In this case, Insurance Company account will be debited to the extent of loss insured and the uninsured amount will be debited to Profit and Loss account.
 


 

If the amount of loss is not insured

In this case, the entire loss will be debited to Profit and Loss account.
 



Illustration 8

Stock of ABC Ltd. is destroyed to the extent of ₹ 10,000. Pass the journal entries in following cases:

  • If goods are fully insured
  • If goods are insured to the extent of ₹ 6,000
  • If goods are uninsured

Solution:

 









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