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Insurance Claims - Loss of Profit
Accountancy
While calculating addmisable additional expense Why the 3rd value I.e gross profit generated additional sales due to additional expense is to be considered What is reason for considering this value?
Answers (27)
Balachandar S
Still if u have further step is not getting to u then tell me i will clear u... Thanks for giving this opportunity to explain.
What I have understood is to recover that 7000 amount (in above example) we will try to sell goods for extra amount of 7000 i.e 80000(for example 80000 is the selling price of goods) worth goods will be sold for 87000 Is this is correct
Balachandar S
I will clear your doubt as much as I can. Because I learned just now..... Tell me first u understand below image then i will come to ur question...... Thanks u.
See this picture once... least of the following of additional exp.... You should tell me 7k is least or 16k is least.....
Thread Starter
lohith perumallaWhile calculating addmisable additional expense we need to calculate 3 values
Yeah we need to calculate 3 values but you should take whichever is lower.......
Thread Starter
lohith perumallaOk i agree that there is additional expense for this additional sale That additional expense is already considered in point (a) again why gp on additional sale is to be considered
The additional expenditure is incurred for making the additional sales, and the additional sales is incurred for making profit. So the additional expenditure was made for making profit. Say, in a case, the profit made through the sales was less than the expenditure itself. Obviously it is a careless error, right? (or an unfortunate case) The insurance company has put the point (c) so as to LIMIT the CLAIM to lower figure in above circumstance ( they don't want to allow a claim of expenditure that is even higher than the fruit (profit) made by that expenditure)
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