1. The document provides information about a company called Manisha Ltd that experienced a fire that destroyed its godown on October 1, 2009. 2. It gives financial information about the company's stock levels and purchases/sales for various periods before the fire. 3. The document asks to calculate the insurance claim amount for the stock lost in the fire, given that the godown was fully insured and stock salvaged was Rs. 40,000.

1. PROBLEM NO. V
Treatment of Abnormal Loss items
Dr. Yashodhan Mithare
mithare@yashodhan.org

2. On 1st October 2009, the godown of Manisha Ltd was destroyed by fire. The records of the company
revealed the following:
Particulars Amount
Stock on 1st April 2008 950000
Stock on 31st March 2009 800000
Purchases for the year ended 31st March 2009 3100000
Sales for the year ended 31st March 2009 4000000
Purchases from 1st April 2009 to 30 September 2009 750000
Sales from 1st April 2009 to 30 September 2009 1000000
1. While valuing the stock on 31st March 2009, a sum of Rs. 10000 was written off on the goods, cost
of Which was Rs. 48000.
2. A part of this stock was sold in June 2009 at a loss of Rs. 4000 on the original cost of Rs. 24000.
3. The remaining of the stock was now estimated to be worth the original cost, subject to the above
exception, gross profit remain at a uniform rate throughout.
4. Stock salvaged was Rs. 40000.
5. The godown was fully insured.
6. Calculate the amount of insurance claim for the loss.

3. Particulars Amount Particulars Amount
To Opening Stock 950000 By Sales 4000000
To Purchases 3100000 By Closing Stock (Normal)
(800000 – 38000)
762000
To Gross Profit (Bal. Fig.) 760000 By Closing Stock (Abnormal) 48000
4810000 4810000

4. Particulars
Normal
Items
Abnormal
Items
Total Particulars
Normal
Items
Abnormal
Items
Total
To Opening Stock 762000 48000 810000 By Sales 980000 20000 1000000
To Purchases 750000 -- 750000 By Loss (Abnormal) -- 4000 4000
To Gross Profit C/D
(19% on 980000)
186200 -- 186200 By Closing Stock
(Balancing Figure)
718200 24000 742200
1698200 48000 1746200 1698200 48000 1746200

5. Summary of the steps
1. Ascertain the amount of abnormal item
2. Deduct total value of abnormal items (-) amount written off from the closing stock of normal
items.
3. Show total value of Abnormal stock as a separate closing stock.
4. Prepare columnar Memorandum Trading Account for normal and abnormal stock items
5. From total sales, separate sale of abnormal stock items from normal stock items and show it
in separate column
6. To calculate stock on the date of fire, combine both normal and abnormal stock.
7. Calculate the claim.

7. Particulars
Normal
Items
Abnormal
Items
Total Particulars
Normal
Items
Abnormal
Items
Total
To Opening Stock 762000 48000 810000 By Sales 980000 20000 1000000
To Purchases 750000 -- 750000 By Loss (Abnormal) -- 4000 4000
To Gross Profit C/D
(19% OF 980000)
186200 -- 186200 By Closing Stock
(Balancing Figure)
718200 24000 742200
1698200 48000 1746200 1698200 48000 1746200
Stock on the date of fire 742200
Less – Stock Salvaged 40000
Actual loss by fire 702200
Amount of Claim is Rs. 702200
Average clause is not applied
(Adjustment No. 5)