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loss on theft

Jai Tripathi (finance manager) (24 Points)

21 April 2010

goods loss on theft from shop but has insurance claims not settled during the financial year , what are the accounting entries to be passed and how to show it in profit & loss , balance sheet. also will it effect VAT computation.

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9 Replies

Amir (Learner) (4016 Points)
Replied 21 April 2010

Dear Sir,

For VAT treatment u have to refer the relevant VAT Act & rules made thereunder.

Loss on account of Theft is an "Extra-ordinary item" in terms of AS-5 -

Extraordinary items should be disclosed in the statement of profit

and loss as a part of net profit or loss for the period. The nature and the

amount of each extraordinary item should be separately disclosed in the

statement of profit and loss in a manner that its impact on current profit

or loss can be perceived.

Eg -

Profit from Ordinary Activities - xxxx

Less: -Loss on account of Theft - xxx

Profit before Taxes - xxxx

(Next year the amount of Insurance claim received will be added in a same manner)

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CA Sanjay Jha (ACCOUNTS MANAGER) (914 Points)
Replied 21 April 2010

Mr. Tripathi G

Firstly u have to book Loss on theft of goods.

Now when u claim insurance, what u expect that insurance claim received or not, if received then how much ?

As per AS 9 if u fulfil all formalities and certify that insurance claim definetely received approxiamate 10,000/- then u have to book as income from insurance claim received.

When u have not certify then u have to better way book when actualy received.

For VAT computation is not effect in both cases because VAT not applicable on Insurance claim.

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shakuntala chhangani (FCA Course co-ordinator WIRC coaching centre) (2525 Points)
Replied 26 April 2010

You need to pass two entries in this case :

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

Goods lost by fire A/c Dr. XX

To Trading / Purchase A/c XX

2. Pass the entry for insurance claim receivable and balance loss

Insurance claim receivable A/c Dr. XX

Loss by fire A/c Dr. XX

To Goods lost by fire A/c XX

At the end of the year, loss by fire will appear into P/L A/c as extraordinary item and insurance claim, not yet received, will be shown on the asset side of the balance sheet

Regards, CA Shakuntala Chhangani

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