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Hi Dear Mike,
The client had a building which is destroyed by fire. Originally purchased for £1m. It had £0.7m value on Balance sheet after Accm. Depreciation just before it was destroyed. The client had a Insurance policy and paid the client £0.9m, the market value.
What should be the accounting treatment that the client should follow? Should the client write down £0.7m straight away but how should the Insurance money be treated?
Many Thanks
Open a disposal account
On the debits you’ll have $1,000,000 cost
On the credits you’ll have $300,000 accumulated depreciation, and …
… $900,000 proceeds …
… leaving a missing figure of $200,000 for the debit side to transfer to the credit side of Statement of Profit or Loss as a gain on disposal
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