178 FARM ACCOUNTING 



counts it would tend to indicate poor management, or that 

 some property cost was excessive, when, as a matter of 

 fact, the unusual event the auction sale was responsible 

 for the loss. 



Fire Loss. Under this title is illustrated the method of 

 handling the transactions incidental to loss of property of 

 any sort by fire. The same treatment would apply in case 

 of hail insurance, tornado insurance or livestock insurance. 



As an example, assume a farm having a blanket fire 

 policy on the buildings and contents amounting to $5000. 

 If the buggy and tool house burns, rendering all ai 

 therein useless, the insurance adjuster calculates the 

 amount of insurance money to which the loser is entitled. 



For the purpose of recording the transactions on tin- 

 books it is necessary to credit the Buildings account with 

 ;he value of the building destroyed, credit K<iuipment ac- 

 count with the value of buggies and tools that were in the 

 building and debit Fire Loss account with the sum of the 

 two debits named. Credit Fire Loss account with the cash 

 received from the insurance company, debiting Cash. If 

 theiv was nothing else to consider, the balance of the Fire 

 Loss account would now show a loss or gain, whose balance 

 would be transferred to Loss and Gain account at the 

 close of the year. 



Quite often, however, in a case like the one cited, some 

 of the remnants can be sold for junk, or there are i 

 from which salvage can be recovered. In such instances, 

 the Fire Loss account is credited with the selling price 

 of any salvage and debited with any expenses incurred in 

 removing such parts from the ruins and disposing of them. 

 If the recovered parts are retained for use on the farm, 

 credit Fire Loss account and debit Equipment account. 

 The latter account bring- credited with the total value of 

 contents immediately after the fire, is now debited with 

 any recovered and kept for further use. 





