How do you record money from an insurance claim involving property?

I WOULD USE A SEPARATE GENERAL LEDGER ACCOUNT SUCH AS LOSS FROM PROPERTY DAMAGE TO RECORD ALL COSTS INCURRED TO GET THE PROPERTY BACK TO IT'S PREVIOUS CONDITION

I would use a separate general ledger account such as Loss from Property Damage to record all costs incurred to get the property back to its previous condition. The costs incurred will be debited to Loss from Property Damage. The amount received from your insurance claim would be credited to the same account. Other money received, such as the salvaging of materials, would also be credited to Loss from Property Damage.If the account Loss from Property Damage ends up with a debit balance, that will be the amount of the loss. If the account has a credit balance, there is actually a gain on the property damage.

This depends on the exact asset/s that were destroyed in the fire and to what extent they were covered.

 

For asset/s that were destroyed that were subject to depreciation, one would take out the accumulated depreciation account too.

 

A delivery vehicle, which had a cost of $10,000 and accumulated depreciation of $3,000, was destroyed by fire. The insurance claim amounted to $5,000.

 

The entries would be:

Dr Insurer (debtor) $5,000

Dr Accumulated depreciation $3,000

Dr Loss $2,000

Cr Delivery vehicle (asset) $10,000

 

Later:

Dr Bank $5,000

Cr Insurer (debtor) $5,000