The document discusses fire insurance calculations involving the average clause and details various trading accounts over multiple years, outlining opening stock, purchases, sales, gross profit, and claim calculations due to fire losses. It provides examples of how to compute actual losses of stock and the claims that can be lodged based on policy amounts and stock values at the time of fire. Figures and percentages are used throughout to illustrate the calculations needed to determine claims and gross profit rates.

1. FIRE INSURANCE -
AVERAGE CLAUSE
Presented By
Dr. N.Renuka Devi
Associate Professor
Department of Bank
Management
Ethiraj College for Women
Chennai

2. AVERAGE CLAUSE

4. MEMORANDUM TRADING ACCOUNT
FROM 1.1.89 TO 19.7.1989
To opening Stock Rs.
3,00,000
By sales Rs. 9,00,000
To purchases 13,00,000 By Value of Stock on date of
fire (B/F)
10,34,000
To Commission 26,000
To Carriage on Purchase 8,000
Gross Profit- 50% of Sales
(9,00,000X 1/3)
3,00,000
19,34,000 19,34,000

5. 50% ON COST ie
50/100
½ on Cost ⅓ on Sales
100 +50=150
50/150=1/3

6. ACTUAL LOSS OF STOCK
Value of Stock on the date of Fire= 10,34,000
Less: Salvaged Stock if any = 2,06,800
--------------
Actual Loss of Stock = 8,27,200
--------------

7. CALCULATION OF CLAIM UNDER AVERAGE CLAUSE
Claim = Amount of Policy X Actual Loss of Stock
Stock on the date of fire
= 8,00,000 X 8,27,200 = 6,40,000
10,34,000
Claim to be lodged = Rs. 6,40,000

8. HOME WORK ADJ 4:
TEXT BOOK: REDDY & MURTHY
Pg No. 12.29
Ex: 5

10. MEMORANDUM TRADING ACCOUNT
FROM 1.1.87 TO 1.4.1987
To Opening Stock Rs.
60,000
By sales Rs. 3,20,000
To Purchases 2,10,000
To Wages 12,000 By Value of Stock on date of
fire (B/F)
40,600
To Carriage Inwards 5,000
Gross Profit
(3,20,000X 23%)
73,600
3,60,600 3,60,600

11. Average GP= 20%+25%+24%
3
= 23%

12. ACTUAL LOSS OF STOCK
Value of Stock on the date of Fire= 40,600
Less: Salvaged Stock if any = 600
--------------
Actual Loss of Stock = 40,000
--------------

13. CALCULATION OF CLAIM UNDER AVERAGE CLAUSE
Claim = Amount of Policy X Actual Loss of Stock
Stock on the date of fire
= 32,000 X 40,000 =
40,600
Claim to be lodged = Rs. 31,527

14. Avg GP = 20+25+24 = 23%
3
EXTRA PROBLEMS EX 9 & 10 R &M
PG NO. 12.31-12.32

18. ADDITIONAL PROBLEMS

20. TRADING ACCOUNT
FOR THE YEAR ENDED 31-12-1984
To opening Stock Rs.
9,614
By sales Rs. 52,000
To purchases 45,258 By Closing Stock 13,272
Gross Profit (Bal Fig) 10,400
65,272 65,272

21. Rate of Gross Profit = GP X100
(1984) Sales
= 10,400 X 100
52,000
= 20%

22. MEMORANDUM TRADING ACCOUNT
FOR THE PERIOD ENDING 22.10.1985
To opening Stock Rs.
13,272
By Sales 49,170
+ Cash sales
misappropriated 400
Rs.
49,570
To purchases 34,827
Less:Adv Samples 1,000 33,827
By Closing Stock (or) Value
of Stock on date of fire (B/F) 7,443
Gross Profit- 20% on
Sales
(49,570X 20%)
9,914
57,013 57,013

23. ACTUAL AMOUNT OF CLAIM TO BE LODGED
Value of Stock on the date of Fire= 7,443
Less: Salvaged Stock if any = 0
--------------
Actual Loss of Stock/ Claim = 7,433
--------------

24. HOME WORK:
TEXT BOOK: REDDY & MURTHY
Pg No. 12.31 ,32
Ex: 8 & 11

27. Hope all had a
happy weekend
and have
completed the
homework

28. Now we move on to
the next Adjustment

30. TRADING ACCOUNT
1993
RS
1994
RS
1995
RS
1993
RS
1994
RS
1995
RS
To opening
Stock
16,000 15,000 16,000 By sales 60,000 66,000 78,000
To
purchases
41,000 47,200 56,600 By
Closing
Stock
15,000 16,000 18,000
Gross Profit
(Bal Fig)
18,000 19,800 23,400
75,000 82,000 96,000 75,000 82,000 96,000

31. Rate of Gross Profit = GP X100 = 18,000 X100 =30%
(1993) Sales 60,000
Rate of Gross Profit = GP X100 = 19,800 X100 =30%
(1994) Sales 66,000
Rate of Gross Profit = GP X100 = 23,400 X100 =30%
(1995) Sales 78,000

32. MEMORANDUM TRADING ACCOUNT
FOR THE PERIOD ENDING 10.5.1996
To Opening Stock Rs.
18,000
By Sales Rs.
99,000
To Purchases
78,000
By Value of Stock on date of
fire (B/F) 26,700
Gross Profit- 30% on
Sales
(99,000X 30%)
29,700
1,25,700 1,25,700

33. ACTUAL AMOUNT OF CLAIM TO BE LODGED
Value of Stock on the date of Fire= 26,700
Less: Salvaged Stock if any = 3,800
--------------
Actual Loss of Stock/ Claim = 22,900
--------------

34. HOME WORK:
TEXT BOOK: REDDY & MURTHY
Pg No. 12.33
Ex: 14

37. Rate of Gross Profit = GP X100 = 1,80,000 X100 =30%
(1984) Sales 6,00,000
Rate of Gross Profit = GP X100 = 1,98,000 X100 =30%
(1985) Sales 6,60,000
Avg. Rate of Gross Profit = 30% + 30% =30%
(1986) 2

38. MEMORANDUM TRADING ACCOUNT
FOR THE PERIOD ENDING 31.12.1986
To opening Stock Rs.
1,65,000
By Sales Rs.
6,48,000
To purchases
4,60,000
By Closing Stock (or) Value
of Stock on date of fire (B/F) 1,71,400
Gross Profit- 30% on
Sales
(6,48,000X 30%)
1,94,400
8,19,400 8,19,400

39. ACTUAL AMOUNT OF CLAIM TO BE LODGED
Value of Stock on the date of Fire= 1,71,400
Less: Salvaged Stock if any = 0
--------------
Actual Loss of Stock/ Claim = 1,71,400
--------------

41. TRADING ACCOUNT
FOR THE YEAR ENDED 31-12-1983
To opening Stock
(36,000x 100/90)
Rs.
40,000
By sales less Returns Rs. 2,00,000
To purchases less Returns 1,45,000 By Closing Stock (or)
Value of Stock on date
of fire
(22,500X 100/90) 25,000
Gross Profit (Bal Fig) 40,000
2,25,000 2,25,000

42. 90 ---- 36,000
100-- ?
36,000 X100/90= 40,000

43. Rate of Gross Profit = GP X100
(1983) Sales
= 40,000 X 100
2,00,000
= 20%

44. Gross Profit % = GP X100
(1984) Sales
= 20
100
S - C= GP
100- 80 =20
105- 80 = 25
5% Increase in Selling price ie
100x5%=5 Therefore 100+5=105 25/105X100=23.81%

45. GROSS PROFIT
Gross Profit % = GP X100
(1983) Sales
= 40,000 X 100
2,00,000
= 20%
Gross Profit % = GP X100
(1984) Sales
= 20
100
5% Increase in price ie
100x5%=5 Therefore 100+5=105
105-

46. MEMORANDUM TRADING ACCOUNT
FROM 1.1.89 TO 19.7.1989
To opening Stock Rs.
36,000
By sales Rs. 1,80,000
To purchases
1,76,400
By Closing Stock (or)
Value of Stock on date
of fire (B/F)
86,400
Gross Profit- 30% of
Sales
(1,80,000X 30%)
54,000
2,66,400 2,66,400

47. ACTUAL AMOUNT OF CLAIM TO BE LODGED
Value of Stock on the date of Fire= 86,400
Less: Salvaged Stock if any = 21,600
--------------
Actual Loss of Stock = 64,800
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