Stock valued at 800 is destroyed by fire, and the Insurance Company approves a claim of 600. How should the accounting entries be adjusted?

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Debit Trading Account with 800; credit Insurance Company with 600 and Profit and Loss Account with 200Subtract 800 from the closing stock in the Trading AccountCredit the Insurance Company for 600 onlyDebit Insurance Company with 600 and Profit and Loss Account with 200; credit Trading Account with 800No entry required

Explanation

The stock loss of 800 should be debited to the Trading Account to reflect the reduction in stock. The Insurance Company’s claim of 600 is credited, representing the amount receivable. The remaining loss of 200 is charged to the Profit and Loss Account as it is not compensated by insurance.