With G.P ratio and without G.P ratio.

We are going to see fire insurance. Before we see the problems that we see the certain basic important regarding fire insurance claim.

Need for fire insurance:

 Enable the business to lodge claim against insurance company and receive sufficient funds to replace the lost asset.

Types of fire insurance policies

 There are two policies which are followed.

  • Loss of stock.
  • Loss of profit.

Loss of stock claim:

Here is a law
Claim =stock on the date of fire-stock salvaged.

Average clause:

 if the stock on the date of fire more than the insured stock.

Stock on the date of fire can b obtained from stock a/c.
Memorandum trading a/c.
Previous a/c year G.P and saves can be used for G.P.R.
Average G.P ratio.
If G.P.R is not given, previous year trading a/c has to be prepared to find G.P ratio.
Undervaluation and over valuation of stock must be adjusted to find normal G.P.
Any samples given out of purchases, goods, drawing, suppression of sale etc., must be adjusted.

When G.P Ratio is Given

 A fire occurred in the premises of Mr. Imran on 15th September 2017. A large part of the stock was destroyed. His stock at 1-1-2017 was 50,000 and 10000 was realized for the salvage. For the period from 1-1-2017 to 15-9-2017 the following information is available.

  • Purchases amounted to 45000
  • Sales amounted to RS.60000.
  • Goods costing RS 2500 were taken by Mr. Imran for his personal use.
  • In April 2017 goods worth RS2000 were given away for advertising purpose, no entire being made in books.
  • The previous accounts reveal that the rate of G.P was 25% on sale.
  • The stock in godown was insured for 40000 subjects to average clause.

When G.P ratio is not given

 a fire occurred in the premises of Mr. Nazeer on 17-10-2017. All stocked were destroyed except to the extent of RS. 60,000.
From the following figures, prepare a statement show, the amount to be claimed from the insurance company.
Stock on 1-1-2016      35000
Stock on 31-12-2016     50000
Purchasing during 2016     150000
Sales during 2016          200000
Purchase from 1-1-17 to the date of fire      165000
Sales from 1-1-17 to the date of fire       180000.