Do you know about - Accounting For guarnatee Claim Settlements
Claim Management! Again, for I know. Ready to share new things that are useful. You and your friends.Insurance is a necessity in any business. Businesses cover themselves against losses such as fire, theft and unexpected natural disasters. It is with the bookkeeping or accounting that owners get it wrong.
What I said. It isn't outcome that the true about Claim Management. You check out this article for info on a person want to know is Claim Management.How is Accounting For guarnatee Claim Settlements
On victorious guarnatee claims, a payment is usually made to the insured. My experience has led me to believe that small businesses have no clue, as to how, to inventory for guarnatee settlements. Most businesses reflect the payment as income.
Not only would this be deceptive but also violates International Accounting Standards. Since the transaction has all to do with assets and nothing to do with income, it should be adjusted against assets. Erroneous accounting for assets might prejudice the business added in future, if similar guarnatee claims are made.
Insurance associates determine claims on assets, on its book value and not its costs. (And yet the asset was insured on its cost at date of purchase). Whereas this principle might vary from country to country, book value is widely accepted as the norm. Since most small businesses fail to mouth proper fixed assets registers, guarnatee associates achieve "desk top valuations", or make an "estimate", on the book value, mostly much lower than its "real" book value. Without proper records, the claimant cannot debunk the assessor's final conclusions.
Before I loose you in a sea of confusion, let me elaborate. If an asset is on your books at least, without the asset register, but you have no purchase date, and this asset is lost due to theft, no strict wear and tear can be furnished. Furthermore, if a claim is settled, and reflects as "income", what happens to the asset that was stolen, but still reflects on your books?
Many reading this article could not care a hoot about the amount crunching involved, but please stay with me for a minute. You might not care, but an investor, a bank and yes, the guarnatee business might pick this up on your financial statements when they quiz, your reports.
The formula used to inventory for guarnatee claims is the "disposal method". Any asset branch to an guarnatee claim should be transferred to a "Disposal Account". Depreciation on the asset for the relevant duration is calculated, and credited to the disposal inventory with the guarnatee settlement. The cost, less depreciation equals book value. Any community amounts over or under book value, will consequent in a loss or profit on disposal.
An guarnatee claim, wrongly entered as "income", can be adjusted by transferring the amount to the disposal account. After effecting these entries, the disposal inventory should equilibrium to zero. Your new records would reveal, the loss or profit on claim (income statement), community in bank account, fixed assets less the stolen/lost asset, and a lower depreciation assessment for the year.
I acknowledge that this is your accountant's job, you any way have a duty to furnish strict records. But how many businesses continue to pay, the same guarnatee premiums on the assets, since purchase date, when they, entitled to a lower premium, due to a lower asset value.(prior to any asset losses).
Also, a precarious asset situation in your books, might lead to problems in your tax affairs.
No business can afford a visit from the Irs. Did you know that tax authorities always set in motion auditing, your assets, before they move on to your income?
No comments:
Post a Comment