INSURANCE CLAIM

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INSURANCE CLAIM:

INSURANCE CLAIM RANI R HOD OF COMMERCE (CA) DON BOSCO COLLEGE KOTTIYAM, KOLLAM.

Learning objectives of this module:

Learning objectives of this module To know the meaning of insurance claim, memorandum trading account, consequential loss etc. To know how to ascertain the value of closing stock at the time of fire. To know how to prepare memorandum trading account. To know how to calculate the value of loss of stock To know about the treatment of average clause. To know about the treatment of abnormal loss etc.

Meanings :

Meanings Insurance It is a means of protection from financial loss. It is one of the form of risk management. Insurance claim Insurance claim is the claim lodged by the business to the insurance company on happening the event of specific loss. In simple words insurance claim is the compensation payable by the insurance company to the insured on happening the event of specific loss

Types of claims:

Types of claims 1. Loss of assets including stock 2. Loss of profit as a consequent to fire (consequential loss)

Loss of assets:

Loss of assets Fixed assets: Fixed assets such as building, machineries, furniture etc. are destroyed by fire, the loss of such assets can be ascertained from the books of accounts properly kept in business Stock of goods : when stock of goods are destroyed, the computation of loss of stock is difficult because the stock were acquired at varying rates

Loss of stock policy:

Loss of stock policy In loss of stock policy, there are three steps for determination of claim for loss of stock. Ascertainment of value of stock at the time of fire. Ascertainment of net loss of stock after deducting the salvage value of stock. Application of average clause.

1.Ascertainment of value of stock at the time of fire. :

1.Ascertainment of value of stock at the time of fire. It may not be usually possible to ascertain the exact value of stock destroyed by fire from the stock register either it being not up to date or being lost by fire. In such a situation , the value of stock can be ascertained by preparing a Memorandum Trading Account

Memorandum trading account:

Memorandum trading account It is an account prepared to find out the value of stock of goods as on the date of fire as the balancing figure of this account. The account is debited with opening stock, net purchases ,direct expenses and gross profit and credited with net sales. Gross profit may be ascertained on the basis of the percentage of the gross profit on sales

Format of memorandum trading account:

Format of memorandum trading account Memorandum trading account For the p eriod from 1 st day of the accounting year to date of fire Particulars Rs particulars Rs To Opening stock To purchases xxxx Less returns xx To carriage inwards To wages To other direct expenses To gross profit (% on sales) Xxx Xxxx Xxx Xxx Xxx xxx By sales xxxxx less returns xxx By closing stock (?) Xxxxx xxx xxxxx xxxxx

2. Ascertainment of net loss of stock after deducting the salvage value of stock:

2. Ascertainment of net loss of stock after deducting the salvage value of stock Statement of net loss of stock Particulars Rs Book value of stock( as per memorandum trading account) Less salvage value Xxx xx Net loss of stock ( claim to be lodged if average clause is not applicable) xxx

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