Simple Question - POA help!
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Hi,
I need help with my POA Homework. I'm doing the chapter on Final Accounts with Balance-Day Adjustments on a worksheet prepared by my POA teacher.
One of my questions has this question in its additional information:
On 30 August 2007, goods which cost $2200 were stolen. No record has been made in the accounts and nocash had been received from the insurance company.
What is the double entry for this question?
I'm not sure what to debit and I'm pretty sure Purchases account should be credited.Dr < ? >
Cr Purchases
Please help, tyvm. :D -
Originally posted by dead_decibel:
Hi,
I need help with my POA Homework. I'm doing the chapter on Final Accounts with Balance-Day Adjustments on a worksheet prepared by my POA teacher.
One of my questions has this question in its additional information:
On 30 August 2007, goods which cost $2200 were stolen. No record has been made in the accounts and nocash had been received from the insurance company.
What is the double entry for this question?
I'm not sure what to debit and I'm pretty sure Purchases account should be credited.Dr < ? >
Cr Purchases
Please help, tyvm. :DDr inventory loss (expense acc)
Cr purchases account (inventory)
For 'O' level case, I don't think an additional inventory loss account is created. So you can just debit to the cost of goods sold expense..
Please correct me if I'm wrong.
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1) What is this company's year end?
2) If cash is expected to be reimbursed from the insurance company, maybe you should debit Debtors (Insurance Recovered).
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Stock and profit as related. so it should be an trading a/c entry.
In O level. Just recorded it in the trading a/c after the closing stock as stock loss. Eg..
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Less: Closing stock xxxx
Less: stock loss xxx
COGS xxxx
GP xxxxx
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when stock is lost, profit decreases.
Yup, what maurizio said is true. In some cases, the Insurance company will reinbursed you with the loss of stock. This entry will be recorded in the P&L revenue side.Double entry for stock loss, it'll not be tested in O level. but you can refer to what tinuviel wrote.
Note:
Stock loss rarely tested in O Level exam. -
Since it's only homework, you write down 2 answer let teacher do MCQ.
Why I think you have to debit debtor (insurance recovery) is simple. It's how the question is structured. If the teacher meant for the stock loss to be written off, the structure of the question would be "On 30 August 2007, goods which cost $2200 were stolen. No record has been made in the accounts."
But your teacher added in "and nocash had been received from the insurance company". If your teacher meant for it to be written off as bad debts, this portion is redundant. This statement creates an expectation that the insurance company is going to make good the insured stock loss.
Give your explanation and write down both answers for your homework. Let your teacher do MCQ.