CMA Intermediate · Financial Accounting · Insurance Claim for Loss of Stock and Loss of Profit
Stock of Gupta Brothers worth ₹5,00,000 at cost was insured for ₹4,00,000 with an average clause. A fire destroyed stock costing ₹3,00,000. Salvage was ₹30,000. How much is the insurance claim?
The claim is ₹2,16,000. Salvage is deducted first to get a net loss of ₹2,70,000, and the average clause then applies the ratio of policy value to stock value (4/5), producing ₹2,16,000.
- A₹2,70,000
- B₹2,16,000Correct
- C₹2,40,000
- D₹3,00,000
Explanation
Net loss = 3,00,000 − 30,000 salvage = ₹2,70,000. Claim = 2,70,000 × 4,00,000/5,00,000 = ₹2,16,000. ₹2,40,000 applies average to gross loss (3,00,000 × 4/5) without deducting salvage.
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