Accounting for insurance claim (destruction of asset)

I am an accounting teacher and have set my students a major assignment which includes an insurance claim on a vehicle written off in an accident. If I do a General Journal entry as below:

DR Insurance Co (Accounts Receivable Control)
DR Accumulated Depreciation
CR Vehicle
DR Loss

the amount does not show in the reconciliation for the Accounts Receivable subsidiary ledger.

What would be your advice for the transaction?

What do you mean by this? How did you determine it? Can you demonstrate on relevant screenshots?

If you are teaching accounting using Manager, do not enable any subsidiary ledgers. Just have only 4 basic tabs which are Summary, Journal Entries, Reports and Settings.

Thanks for the reply Lubos. I am not using Manager in my classes, rather I am using it to do my solution for the assignment (I am teaching in China and the students have struggles with the English language) This is the A/R schedule as at the end of the period in my assignment…


This is the journal entry in the General Journal:

My concern is that if I raise a sales invoice for the value of the insurance claim, it may show up in the A/R control account in addition to the entry for the GJ entry. Maybe I am not understanding this program as well as I think (I have had to fly solo with learning the ins and out of it so far!)

Thanks for your advice!

I don’t think there should be a sales invoice for the value of the insurance claim, because it does not represent revenue earned. Therefore, the value of the claim should not be an account receivable. Instead, it should just be a debit to a cash or bank account.

I notice your Fixed Assets tab is not enabled. I suggest you account for the van and its disposal under that. I find Manager’s process for handling fixed assets is very simple.

Thanks Tut, I will give that a go!

I thought it possibly would go as an A/R because insurance companies always take as long as possible to pay claims!:stuck_out_tongue:

The problem with that perspective is that until they pay the claim, you can’t know how much the reimbursement will be. So one of the principles for recognition of revenue wouldn’t be satisfied. More importantly, the claim isn’t income, but reimbursement for a loss–and usually only partial reimbursement at that. So the best way to handle it in Manager is to enter it as the disposal price. Manager will automatically allocate the unreimbursed book value (or a possible but unlikely gain over book) to appropriate accounts.

The amount wont show up in the Accounts Receivables because you can’t “create” AR transactions via Journals, they can only be created via Sales Invoices. Journals can only be used to amend existing AR transactions.

Your Journal should use Dr “Insurance Claims Unpaid” instead of the AR entry.

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