CA IPCC
ACCOUNTING
Topic: Insurance Claims ANSWERS
Date: 24th June 2011 Max. Marks : 30 Time : 90 Minutes

Answer 1. (a) Calculation of Short – Sale Standard Sale Trend ( 15%) Actual Sale Short Sale = = = = 2,00,000 30,000 (80,000) Rs. 1,50,000

Add: Less:

(2 marks)

(b)

Calculation of Gross Profit ratio G.P. Ratio =

Net Profit + insured standing charges ×100 Turnover of Previous year
=

70, 000 + 56, 000 × 100 4, 20, 000
(2 marks)

G.P. Ratio = 30%

(c)

Calculation of profit lost on sale Profit lost = Short sale×G.P.Ratio = 1,50, 000 × 30% = Rs. 45,000

(1 mark)

(d)

Calculation of Additional expense claim (i) Additional expense = Rs. 6,700 (ii) Reduction in sales avoided × G.P. Ratio OR

AdditionalSales due to additional expense×G.P.Ratio
= Rs. 80, 000 × 30% = Rs. 24,000 (iii)

(1 mark)

Additional expenses×AAT×G.P.Ratio (AAT×G.P.Ratio) + Uninsured standing charges
=

6700 × 517500 × 30% ( 517500 × 30%) + 8000
(1 mark)

= Rs. 6,372 (Approx)

1

(e)

Calculation of Claim Profit lost Add : Additional expenses Less : Saving in insured standing charges Total loss

= = = =

45,000 6,372 (2450) 48,922

Claim =

Total loss×Policy Amount AAT×G.P.Ratio 48922 × 125000 = 517500 × 30%
= Rs. 39390 ( Approx) (3 marks)

Claim = Rs. 39,390 Working Notes : 1. Calculation of AAT Sales 1/2/2005 – 31/2/2006 (Annual turnover) Add : Trend ( 15%) AAT = = = 4,50,000 67,500 5,17,500

Answer 2. (a) Calculation of Short sale Standard Sale = Add : Trend ( 10%) = Less: Actual sales = Short Sale = (b) Calculation of Gross Profit Ratio G.P. Ratio =

7,50,000 75,000 (2,25,000) Rs. 6,00,000

(2 marks)

Net Profit + insured standing charges ×100 Turnover of Previous year 1, 20, 000 + 2, 40, 000 = × 100 20, 00, 000
= 18% = 2% = 20%

Add : Increase in G.P. Ratio G.P. Ratio

(2 marks)

(c) Calculation of Profit lost on