Insurance Claim Check Bookkeeping Question

Insurance Claim Check

Insurance Claim Check

How to post an insurance claim check which was received in payment of property loss without it showing up as income?

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Aug 24, 2023
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starstarstarstarstar 		Property Loss Insurance Claim
by: BB

When you receive an insurance claim check for property loss, it's typically not recorded as income but rather as a reimbursement for a specific loss. Here's how you might record it:

Debit the Bank Account: This increases the cash in the bank by the amount of the check you received.

Credit the Asset Account: If the insurance money is to replace or repair a specific asset, you might credit the asset account, thereby reducing the value of the asset by the loss.

Or, Credit a Liability Account: If you've already recorded the loss as an expense or liability, you might credit that account to offset the loss.

The exact method and accounts used depend on the nature of the loss and how you've previously recorded it. It's best to consult with an accountant or a financial professional who is familiar with the specific accounting practices in your jurisdiction, as they can guide you in the most accurate way to post the transaction.

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Insurance Credit Back Bookkeeping Question

by Shelly
(Canada)

Insurance Credit Back

Insurance Credit Back

I have a credit back from insurance and I need to know how I should enter this in my business ledger.


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May 26, 2018
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starstarstarstarstar 		Insurance Cash Back
by: Stephanie

Thank you for your question about how to account for an insurance credit in your bookkeeping ledger.

The best way to enter an insurance credit is to journal the money coming back in into the same insurance expense account that was used when you made the payment.

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Insurance Reimbursements for Property Damages

by Sue
(PA)

I work for a small municipal authority. We do fund accounting. Received two checks for storm damage on property from insurance. One was for tree removal and the other was for repairs to the building the tree fell on.

Don't know how to categorize. The only revenue category I have that it would fit in would be under Misc. Revenue but I don't think that is correct. If I create another category what would I call it? Also when I pay out for the repairs and tree removal I'm not sure how to categorize that either.

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Aug 24, 2023
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starstarstarstarstar 		Insurance Fund Accounting
by: BB

In fund accounting, especially in a municipal setting, categorizing transactions can be a bit complex. Here's a general guide on how you might handle this situation:

Insurance Proceeds:

Debit the Bank Account: To record the receipt of the insurance checks.

Credit an Insurance Recovery Account: You may want to create a new revenue category called "Insurance Recovery" or "Storm Damage Recovery."

This would specifically categorize the funds as being related to recovery from the damage rather than general revenue.

Expenses for Tree Removal and Building Repairs:

Debit an Expense Account: You might create two separate expense accounts, one called "Tree Removal Expense" and another called "Building Repair Expense."

Credit the Bank Account: To record the payment to the contractors for the tree removal and building repairs.

By creating specific accounts for these transactions, you'll have a clear and traceable record of the events, and it'll be easier to report and analyze. Always consult with an accountant or financial professional experienced in fund accounting within your jurisdiction to ensure that your entries align with local regulations and the specific requirements of your municipal authority.

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Partnership Life Insurance

by David Hying
(York, Nebraska)

What is the proper entry for life insurance premiums paid by an LLC for each partner (2). LLC is the owner of two policies, one on each partner and the LLC is the beneficiary. Can any part be expensed or does the entire premium have to come out of the LLC equity?

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Aug 24, 2023
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starstarstarstarstar 		Partnership Life Insurance Premiums
by: BB

The proper accounting for life insurance premiums paid by an LLC on its partners depends on the arrangement and the purpose of the policies.

If the insurance is considered a form of compensation or a fringe benefit to the partners:

Debit Insurance Expense
Credit Cash/Bank
In this case, the premiums would be considered an ordinary and necessary business expense and could be deductible.

If the LLC is both the owner and beneficiary of the policies (common in buy-sell agreements or key person insurance):

Debit Owner's Equity or Partner's Capital Account
Credit Cash/Bank
Under this scenario, the premiums are not generally considered a deductible business expense. Instead, they are treated as distributions to the partners and reduce the equity of the LLC.

It's worth noting that tax and accounting rules can be complex, and the treatment may vary depending on the specifics of the situation and jurisdiction. Consulting with a tax professional who is familiar with the laws applicable to your LLC would be a wise step to ensure proper handling.

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