Q-3 The Assessee was a Company carrying on business of manufacture and sale of Art-Silk cloth. It purchased Machinery worth 4 Lakhs on 1.5.2007 and insured it with United India Assurance Ltd. against Fire, Flood, Earthquake, etc. The written down value of the asset as on 01.04.2021 was 2,08,800, The Insurance policy contained a re-instatement clause requiring the insurance company to pay the value of the machinery, as in the date of the fire, etc., in case of destruction of loss. A fire broke out in August 2021 causing extensive damage to the machinery of the Assessee rendering them totally useless. The Assessee company received a sum of 6 Lakhs from the Insurance Company on 15th March, 2022. Discuss the issue arising on account on the transactions and their treatment. (Cost Inflation Index for F.Y. 2007-08 and 2021-22 is 129 and 317 respectively)

Q-3 The Assessee was a Company carrying on business of manufacture and sale of Art-Silk cloth. It purchased Machinery worth 4 Lakhs on 1.5.2007 and insured it with United India Assurance Ltd. against Fire, Flood, Earthquake, etc. The written down value of the asset as on 01.04.2021 was 2,08,800, The Insurance policy contained a re-instatement clause requiring the insurance company to pay the value of the machinery, as in the date of the fire, etc., in case of destruction of loss. A fire broke out in August 2021 causing extensive damage to the machinery of the Assessee rendering them totally useless. The Assessee company received a sum of 6 Lakhs from the Insurance Company on 15th March, 2022. Discuss the issue arising on account on the transactions and their treatment. (Cost Inflation Index for F.Y. 2007-08 and 2021-22 is 129 and 317 respectively)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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