FIRE iNSURANCE - AVERAGE CLAUSE.pptx

Average clause in an insurance policy is a clause requiring that you bear a proportion of any loss if your assets were insured for less than their full reinstatement value.

1. FIRE INSURANCE -AVERAGE CLAUSE Presented By Dr. N.Renuka Devi Associate Professor Department of Bank Management Ethiraj College for Women Chennai

2. AVERAGE CLAUSE

3. MEMORANDUM TRADING ACCOUNT FROM 1.1.89 TO 19.7.1989 To opening Stock Rs. 3,00,000 By sales Rs. 9,00,000 To purchases 13,00,000 By Value of Stock on date of fire (B/F) 10,34,000 To Commission 26,000 To Carriage on Purchase 8,000 Gross Profit- 50% of Sales (9,00,000X 1/3) 3 ,00,000 19 ,34,000 19,34,000

4. 50% ON COST ie 50/100 ½ on Cost ⅓ on Sales 100 +50=150 50/150=1/3

5. ACTUAL LOSS OF STOCK Value of Stock on the date of Fire= 10,34,000 Less: Salvaged Stock if any = 2,06,800 -------------- Actual Loss of Stock = 8,27,200 --------------

6. CALCULATION OF CLAIM UNDER AVERAGE CLAUSE Claim = Amount of Policy X Actual Loss of Stock Stock on the date of fire = 8,00,000 X 8,27,200 = 6,40,000 10,34,000 Claim to be lodged = Rs. 6,40,000

7. HOME WORK ADJ 4: TEXT BOOK: REDDY & MURTHY Pg No. 12.29 Ex: 5

8. MEMORANDUM TRADING ACCOUNT FROM 1.1.87 TO 1.4.1987 To Opening Stock Rs. 60,000 By sales Rs. 3,20,000 To Purchases 2,10,000 To Wages 12 ,000 By Value of Stock on date of fire (B/F) 40,600 To Carriage Inwards 5,000 Gross Profit (3,20,000X 23%) 73,600 3,60,600 3,60,600

9. Average GP= 20%+25%+24% 3 = 23%

10. ACTUAL LOSS OF STOCK Value of Stock on the date of Fire= 40,600 Less: Salvaged Stock if any = 600 -------------- Actual Loss of Stock = 40,000 --------------

11. CALCULATION OF CLAIM UNDER AVERAGE CLAUSE Claim = Amount of Policy X Actual Loss of Stock Stock on the date of fire = 32 ,000 X 40,000 = 40,600 Claim to be lodged = Rs. 31,527

12. Avg GP = 20+25+24 = 23% 3 EXTRA PROBLEMS EX 9 & 10 R &M PG NO. 12.31-12.32

13. ADDITIONAL PROBLEMS

14. TRADING ACCOUNT FOR THE YEAR ENDED 31-12-1984 To opening Stock Rs. 9,614 By sales Rs. 52,000 To purchases 45,258 By Closing Stock 13,272 Gross Profit (Bal Fig) 10 ,400 6 5,272 65,272

15. Rate of Gross Profit = GP X100 (1984) Sales = 10 ,400 X 100 52,000 = 20%

16. MEMORANDUM TRADING ACCOUNT FOR THE PERIOD ENDING 22.10.1985 To opening Stock Rs. 13,272 By Sales 49,170 Cash sales misappropriated 400 Rs. 49,570 To purchases 34,827 Less:Adv Samples 1,000 33,827 By Closing Stock (or) Value of Stock on date of fire (B/F) 7,443 Gross Profit- 20% on Sales (49,570X 20%) 9,91 4 57 ,013 57,013

17. ACTUAL AMOUNT OF CLAIM TO BE LODGED Value of Stock on the date of Fire= 7,443 Less: Salvaged Stock if any = 0 -------------- Actual Loss of Stock/ Claim = 7,433 --------------

18. HOME WORK: TEXT BOOK: REDDY & MURTHY Pg No. 12.31 ,32 Ex: 8 & 11

19. Hope all had a happy weekend and have completed the homework out today’s topic?

20. Now we move on to the next Adjustment

21. TRADING ACCOUNT 1993 RS 1994 RS 1995 RS 1993 RS 1994 RS 1995 RS To opening Stock 16,000 15,000 16,000 By sales 60,000 66,000 78,000 To purchases 41,000 47,200 56,600 By Closing Stock 15,000 16,000 18,000 Gross Profit (Bal Fig) 18,000 19,800 23,400 75,000 82,000 96,000 75,000 82,000 96,000

22. Rate of Gross Profit = GP X100 = 18,000 X100 =30% (1993) Sales 60,000 Rate of Gross Profit = GP X100 = 19,800 X100 =30% (1994) Sales 66,000 Rate of Gross Profit = GP X100 = 23,400 X100 =30% (1995) Sales 78,000

23. MEMORANDUM TRADING ACCOUNT FOR THE PERIOD ENDING 10.5.1996 To Opening Stock Rs. 18,000 By Sales Rs. 99,000 To Purchases 78,000 By Value of Stock on date of fire (B/F) 26,700 Gross Profit- 30% on Sales (99,000X 30%) 2 9,700 1,2 5,700 1,25,700

24. ACTUAL AMOUNT OF CLAIM TO BE LODGED Value of Stock on the date of Fire= 26,700 Less: Salvaged Stock if any = 3,800 -------------- Actual Loss of Stock/ Claim = 22,900 --------------

25. HOME WORK: TEXT BOOK: REDDY & MURTHY Pg No. 12.33 Ex: 14

26. Rate of Gross Profit = GP X100 = 1,80,000 X100 =30% (1984) Sales 6,00,000 Rate of Gross Profit = GP X100 = 1,98,000 X100 =30% (1985) Sales 6,60,000 Avg. Rate of Gross Profit = 30% + 30% =30% (1986) 2

27. MEMORANDUM TRADING ACCOUNT FOR THE PERIOD ENDING 31.12.1986 To opening Stock Rs. 1,65,000 By Sales Rs. 6,48,000 To purchases 4,60,000 By Closing Stock (or) Value of Stock on date of fire (B/F) 1,71,400 Gross Profit- 30% on Sales (6,48,000X 30%) 1, 94,400 8,19,400 8,19,400

28. ACTUAL AMOUNT OF CLAIM TO BE LODGED Value of Stock on the date of Fire= 1,71,400 Less: Salvaged Stock if any = 0 -------------- Actual Loss of Stock/ Claim = 1,71,400 - -------------

29. TRADING ACCOUNT FOR THE YEAR ENDED 31-12-1983 To opening Stock (36,000x 100/90) Rs. 40,000 By sales less Returns Rs. 2,00,000 To purchases less Returns 1,45,000 By Closing Stock (or) Value of Stock on date of fire (22,500X 100/90) 25,000 Gross Profit (Bal Fig) 40,000 2,25,000 2,25,000

30. 90 ---- 36,000 100-- ? 36,000 X100/90= 40,000

31. Rate of Gross Profit = GP X100 (1983) Sales = 40,000 X 100 2,00,000 = 20%

32. Gross Profit % = GP X100 (1984) Sales = 20 100 S - C= GP 100- 80 =20 105- 80 = 25 5% Increase in Selling price ie 100x5%=5 Therefore 100+5=105 25/105 X100=23.81%

33. GROSS PROFIT Gross Profit % = GP X100 (1983) Sales = 40,000 X 100 2,00,000 = 20% Gross Profit % = GP X100 (1984) Sales = 20 100 5% Increase in price ie 100x5%=5 Therefore 100+5=105 105-

34. MEMORANDUM TRADING ACCOUNT FROM 1.1.89 TO 19.7.1989 To opening Stock Rs. 36,000 By sales Rs. 1,80,000 To purchases 1,76,400 By Closing Stock (or) Value of Stock on date of fire (B/F) 86,400 Gross Profit- 30% of Sales (1,80,000X 30%) 54,000 2,66,400 2,66,400

35. ACTUAL AMOUNT OF CLAIM TO BE LODGED Value of Stock on the date of Fire= 86,400 Less: Salvaged Stock if any = 21,600 -------------- Actual Loss of Stock = 64,800 --------------