Insurance--it's one of those things you're only happy about when you really need it, but it sure does come in handy when you really need it. This is especially the case for costly repairs and the reimbursement for these repairs or even replacements. Another challenge is determining how to account for these reimbursed funds under accrual accounting conventions.
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Determine the amount of the proceeds of the damaged property. This is the amount sent to you by the insurance company.
Locate the entry made to record the cost of the repair. The amount can be validated with a receipt. The line item is usually "Repairs from damaged property".
Debit insurance proceeds to the Repairs account. The entries should look like this: Insurance Proceeds on damaged property: Debit Repairs for damaged property: Credit
Record a loss on the insurance settlement. Sometimes the insurance company will pay you less than the amount you paid. This usually happens when net book value of the property (book value minus accumulated depreciation) is more than the amount reimbursed. If this is the case record the entries as: Insurance Proceed on damaged property: Debit Loss on Insurance Settlement : Debit
Property Account : Credit If there's a surplus in the account, that is, the insurance company paid more than the amount you paid, then enter the following: Insurance Proceed on damaged property: Debit Property Account: Credit Surplus on Insurance Settlement: Credit