Hi guys we are going to solve one more problem so here’s the question a fire broke out on the premises of a trader on 30/6/2013 30/6/2013 resulting in the destruction of a greater part of his stock greater part of his stock it means that the entire stock was not destroyed there was some amount of stock that was saved from the fire that means salvaged okay so we will come to that value of stock on 1/1/2013 is given okay 1/1/2013 means the current year the year when the fire was occurred so the opening stock is given okay then the purchases is given purchases from 1/1/2013 to 3/6/2013 and then the sales is given sales in the above period so purchases and sales of the current year are given okay that is up to the date of the fire okay then they have given us value of stocks salvaged that is 2000 value of stock salvaged means the stock that was saved from the fire okay then they have given us additional information of three years 2010, 2011 and 2012 these three are the previous years okay so they have given us purchases, sales, gross profit okay so here there is already given us the gross profit of the previous years so here we don’t have to prepare trading account ok we will directly prepare the memorandum trading account and all these three we will take in the memorandum trading account okay and the gross profit is given so we will not prepare the trading account okay then a value of stock salvaged this we will take in the statement.
Where we will take? it statement okay in the statement of fire insurance claim these three in the memorandum trading account okay then they are saying prepare a statement showing the amount to be claimed from the insurance company so we have to find the closing stock from the memorandum trading account and from the statement we have to find the amount of claim that will be compensated by the insurance company okay okay let’s solve the problem now then already given us the gross profit okay so we don’t need to prepare the trading account but we need to find the GP rate so first we’ll prepare the working note working note calculation of GP rate okay so there are three years 2010 2011 2012 so we need to find the GP rate of all the three years and then we will find the average GP rate okay so let’s see 2010 there is gross profit is 65,000 okay so 65,000 / 500,000 that is the sales the formula is what GP/Sales into 100 GP rate formula is GP / Sales into 100 so into 100 that gives us 13% okay 13% then 2011 okay thirty-two 32,000/320,000 into 100 it is 10% okay then 38,000 / the sales 380,000 into 100 ok that gives us 10% so we have found the GP rates of all the three years okay now we have to find average GP rate.
How to find average GP rate? it is simple we’ll add all these three 13+10 +10 divided by number of years that is 3 so one two three / 3 okay so it is 33 /3 that is 11% okay so 11 % will be the GP rate that we will use in the memorandum trading account okay easy right okay after finding the GP rate will prepare the memorandum trading account okay so first you will take the To Opening Stock okay it is given in the question opening stock of the year 2013 and that is 25,000 okay 25,000 it’s given in the question okay then next we will take To Purchases okay purchases is also given in the question up to the data fire that is 3/6/2013 okay so purchases is 91,000 okay then By Sales ok we’ll take sales By Sales up to the date of fire 113,200 113,200 okay all right then we will need to find gross profit so To Gross Profit we found the GP rate as 11% okay so we will take 11% of sales that is 11/100 into 113,200 and it is equal to 12,452 ok so we found the gross profit now we will find the closing stock okay closing stock will be the balancing figure okay balancing figure so first we’ll find a total this side has to be bigger and this side is 25,000+91,000+12452 it is 128452 so we write it on the both side okay so 128,452 – 113,200 is equal to 15,252 okay so we have found the closing stock right so we have found the closing stock as 15,252 15,252 okay all right easy right okay now next we will do the statement of fire claim okay.
Okay after preparing the memorandum trading account and finding the closing stock till the data fire we will prepare statement of fire claim okay so first we will take here closing stock on the date of the date of fire okay the date was 3/6/2013 ok then we will write the amount that is 15,252 ok then we will subtract value of stock Salvaged ok salvaged means the amount of stock that was saved from the fire okay in the question it is given it is 2000 so we will less(-) 2000 15,252-2000 equal to 13,252 okay so the amount of claim is 13,252 okay so we have found the amount of claim on the day of fire there was 15,252 worth of stock in the business okay and 2000 was saved from the fire so 13,252 were burned and the claim should be equal to the amount of loss incurred okay all right easy right okay at first we prepared a working note for the calculation of GP rate and we found out the GP rate of all these three years then we took out the average of these three years there were 13+10+10 divided by 3 and it was 33 by 3 as the average GP rate comes out to be 11% 11% ok after preparing the working note for the calculation of average GP rate we prepared memorandum trading account to find out the closing stock on the date of fire ok so first we took the opening stock then we took the purchases and then the sales and all these three were given in the question ok but the gross profit was not given in the question so to find that we took 11% % of sales this sales okay and why 11% ? That is because 11% 11% is the average GP rate ok so we found out the grass profit death 12,452 alright then as a balancing figure we found out the closing stock as 15,252 ok after preparing the memorandum trading account and finding out the closing stock we prepared statement of fire claim to find out the amount of claim so first we took the closing stock as 15,252 and then we subtracted the value of stock salvaged which was 2000 ok and it was given in the question Salvage means the amount of stock that was saved from the fire so we subtracted it and got the amount of claim as 13,252 ok easy right all right. Fire Insurance Claim Problem.