treatment of ins money received

C

confusedchi

Guest
As a sole trader I recently received an insurance payment against a vehicle which was written off. Please advise on how to record the following:
1) loss of asset (value recorded with depreciation last year)
2) receipt of insurance payment (moeny recd was less VAT and excess) - not income received I assume
3) treatment of net loss between recorded value and money received

I am using TAS basics as accounting software - specific advice would be much appreciated! I assume that purchase of replacement vehicle not affected by insurance transactions and simply recorded as asset:addition and depreciated at year end?

Thanks
 
Are you preparing your own accounts for tax returns? If you can't leave it for your accountant to do journals on you would:
enter the insurance receipt into the bank and credit the vehicle asset code (balance sheet).
Do a journal (if you can, I don't have the Tas basics in front of me) to debit vehicle depreciation on the balance sheet, credit the asset code.
Also credit the asset code with the calculated loss, debit a code on the profit and loss expense side with corresponding loss on disposal of asset.

Say van was €10,000, accumulated depreciation so far €2,000, you got €5,000 from insurance. After the above journals, the vehicle cost on balance sheet will have decreased €10,000, accumulated depreciation be €2,000 lower, and in the profit and loss expenses there will be a figure of €3,000 as loss on disposal of asset.

If you are doing the tax computation that disposal loss won't form part of your trading profit and loss. Instead you would have to look at capital allowances.
 
I am starring at a similar problem and am also using TAS so I will post what I did if it is of any use. My insurance settlement was in regard to damage done to rental properties at the big freeze last year. I went to 111 - Maintain Chart of Accounts and typed in the Acct. number for Insurance (in my case 5220-100). I edited the acct. to 5220-200 and titled it Insurance Settlements and Rebate. When it asked Account and Nominal Group I put in Current Asset both times. Perhaps I could have put in Fixed Assets if the insurance settlement was targeting damage to the property and furniture, but I did not have enough info to make that call. I then put CASH in the Analysis Category in order differentiate it from Income/Expense.

I reviewed this set up in the P&L and Trial Bal. to see what it looked like. I didn't like how it read in the Current Assets. This money was lodged directly into the bank and used to offset the cost of repairs so I went back to 111-Chart of Accounts and selected 5220-200 again but changed the account type to EXPENSE and Debit A/c. Now the P&L Statement shows this amount coming off the Operating Expense Column (i.e. offsetting the Property Repairs & Maintenance) and in the Credit Column of the Trial Balance. I may be missing a journal entry here but I don’t know what that would be. In the end the money is clearly showing in both the P&L and Trial.Bal so if there is any issue the Accountant can deal with it. I’m only the Bookkeeper. But let me know what you think of those entries. Thanks.
 
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