JOURNAL ENTRIES IN CASE OF LOSS OF GOODS


First you need to crate following account

1. Loss of Goods: (Under Purchase Group) : you need this in case of loss of traded goods. So that inventory could be nuterilised

2. Loss of Goods by Fire and/or Theft: you need this account to transfer your loss to profit and loss account.

You need to pass two entries in this case :

1. To remove cost of goods lost from trading A/c to arrive at normal GP

Loss of Goods  A/c Dr.    XX

To Purchase A/c    XX

2. If there is an insurance, pass the entry for insurance claim receivable and balance for loss :

Claim receivable A/c Dr.      XX

Loss by fire A/c Dr.               XX

To Loss of Goods A/c                   XX

At the end of the year, loss by fire will appear into Profit and Loss Account under the group of extraordinary item.  Insurance claim, not yet received, will be shown on the asset side of the balance sheet.

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