WHAT IS THE TEXTBOOK WAY TO PROCESS INSURANCE CLAIMS?

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Hi, because of water damage, lights in the display windows had to be replaced. We claimed the disbursement under our insurance.

Below are the details of the transactions as they occurred, followed by the list of relevant accounts available in our accounting system.

What is the TEXTBOOK WAY to post the journals for those transactions using the accounts available, please and thank you. Everyone has got slightly different ideas at the office.

Please note that none of the months of May, June and July are closed yet, so I won't need any additional transaction journals to enter the transactions.

Thanks in advance to those who will give it a go at answering my question. 🙏


DETAILS OF TRANSACTIONS

  • In MAY we receive the invoice for the work done: $ 3,738.82 ex GST
  • In JUNE we paid the bill to the electrician who carried out the work
  • In JULY we received the refund for the amount spent MINUS EXCESS of $ 500 (ie. we receive a refund for $ 3,238.82)


RELEVANT AVAILABLE ACCOUNTS

  • [OTHER CURRENT ASSETS] Insurance Claims
  • [OTHER CURRENT LIABILITY] Insurance Works
  • [EXPENSE] Repairs and Maintenance
  • [FIXED ASSETS] Fixtures and Fittings

Best Answers

  • Kris_Williams
    Kris_Williams Member Posts: 3,393 Reckon Accounts Hosted Expert Reckon Accounts Hosted Expert
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    I would post the cost of repairs to Repairs and Maintenance expense and do a Cash Sale for the refund using an item linked to the same repairs and maintenance account including GST (or a journal if you are comfortable with journals) The only thing that complicates this is the fact that it is spread over 2 financial years. So you may want to post the refund to an income account, perhaps insurance claim. I don’t believe any of this would go to a balance sheet item.

    another thing to consider is doing an invoice to the insurance company in June for the refund, now you can link the item to the expense account, and Receive the payment in July

  • Kris_Williams
    Kris_Williams Member Posts: 3,393 Reckon Accounts Hosted Expert Reckon Accounts Hosted Expert
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    Ok first of all I misread the cost of the repair as being inclusive of GST which is why I followed that up with my error. There are always different ways of approaching these things, and whilst yours may give you the desired result I think it is very long winded. Again I would just enter the payment to the expense account, and the refund via the sales receipt or invoice window without GST, which seems to be the case given the figures you stated, and link the invoice or sales receipt item to an income account called Insurance claim received. There is no need to record the excess anywhere I don’t believe as the income and expense difference will reflect that

Answers

  • marco_petershearer
    marco_petershearer Member Posts: 8
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    Thank you very much Kris! 🙏

  • Acctd4
    Acctd4 Accredited Partner Posts: 3,482 Reckon Accounts Hosted Expert Reckon Accounts Hosted Expert
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    @marco_petershearer

    It depends whether there was a GST component in the settlement amount you received. If there was, this needs to be reported in your BAS (eg Total Income @ G1, GST component at 1A)

    If not, it's BAS excluded.

    If GST is applicable, I would create a Sales Receipt with new Item(s) linked to applicable Income (or Other Income accounts) with GST tax codes.

    If no GST is applicable, you can either enter as above without tax codes OR enter as a stand-alone Deposit. However, it should still be reflected as Income (rather than a negative Expense). Although the end result is the same, this income should be reported separately in the tax return.

    Shaz Hughes Dip(Fin) ACQ NSW, MICB

    *** Reckon Accredited Partner (AP) Bookkeeper - specialising EXCLUSIVELY in Reckon Accounts / Hosted ! ***

    * Regd BAS Agent (No: 92314 015)* ICB-Certified Bookkeeper* Snr Seasonal Tax Consultant since 2003 *

    Accounted 4 Bookkeeping Services

    Ballajura, WA

    shaz@accounted4.com.au

    https://accounted4.com.au

    (NB: Please give my post a Like or mark as Accepted Answer if I have been able to resolve your query as this helps others when seeking solutions!)
  • Kris_Williams
    Kris_Williams Member Posts: 3,393 Reckon Accounts Hosted Expert Reckon Accounts Hosted Expert
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    I stand corrected, sorry to mislead. I assumed there was GST because of the amount that was refunded

  • marco_petershearer
    marco_petershearer Member Posts: 8
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    Thanks a lot @Kris_Williams and @Acctd4 ! Assuming no GST, I had come up with the solution attached: same scenario, just different amounts and assuming no GST to keep things simple. Would you be able to tell me if it is wrong and why? Keen to improve my knowledge from the community! Please and thank you

    🙂

  • marco_petershearer
    marco_petershearer Member Posts: 8
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    Amazing, thanks @Kris_Williams!

  • Acctd4
    Acctd4 Accredited Partner Posts: 3,482 Reckon Accounts Hosted Expert Reckon Accounts Hosted Expert
    edited August 2023
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    As per Kris's explanation above, the excess is just the portion of the repairs not covered by the insurer (eg your out of pocket amount for these) so is already accounted for in the repair cost:

    Note: Reckon Accounts/Hosted is designed to be used for entry of sales forms (eg invoices, sales receipts) & purchase forms (bills, CC charges, Chqs) It creates the relevant GJ for you automatically in the background, for every single transaction you enter. You can always view this by clicking on the Journal button:



    Shaz Hughes Dip(Fin) ACQ NSW, MICB

    *** Reckon Accredited Partner (AP) Bookkeeper - specialising EXCLUSIVELY in Reckon Accounts / Hosted ! ***

    * Regd BAS Agent (No: 92314 015)* ICB-Certified Bookkeeper* Snr Seasonal Tax Consultant since 2003 *

    Accounted 4 Bookkeeping Services

    Ballajura, WA

    shaz@accounted4.com.au

    https://accounted4.com.au

    (NB: Please give my post a Like or mark as Accepted Answer if I have been able to resolve your query as this helps others when seeking solutions!)
  • marco_petershearer
    marco_petershearer Member Posts: 8
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    thanks heaps @Acctd4!