Calculating Stock on Date of Fire and Insurance Claim Amount

The video tutorial covers the process of valuing stock on the date of a fire for insurance claims. It emphasizes the importance of focusing on physical stock at the fire location and valuing it at cost. The tutorial explains procedures for handling stock records, calculating gross profit ratios, and excluding abnormal items from calculations. It concludes with final considerations for stock valuation and insurance claims.

What is the primary goal when calculating stock on the date of fire?

• To find out the physical stock lost in the fire

• To determine the market value of the stock

• To assess the insurance policy value

• To calculate the profit margin

Why should stock be valued at cost for insurance claims?

• Because the cost represents the actual loss

• To maximize the claim amount

• To comply with tax regulations

• Because market value is irrelevant

When stock records are available, what should be added to the book stock on the date of fire?

• Goods in transit

• Goods returned by customers

• Goods received but not included in purchases

• Goods sold but not delivered

What should be done with goods sent on approval that are not yet sold?

• Include them in the closing stock

• Ignore them in calculations

• Exclude them from the closing stock

• Value them at market price

What is the purpose of preparing a memorandum trading account?

• To calculate the net profit

• To determine the market value of assets

• To find the stock on the date of fire

• To prepare financial statements

What is the balancing figure in a memorandum trading account?

• Total sales

• Stock on the date of fire

• Gross profit

• Net profit

How is the gross profit ratio typically calculated?

• Gross profit divided by net sales

• Net purchases divided by gross profit

• Net sales divided by gross profit

• Gross profit divided by net purchases

What should be done if there is a wide fluctuation in gross profit from year to year?

• Use the highest gross profit ratio

• Ignore the fluctuations

• Use the lowest gross profit ratio

• Calculate a weighted average gross profit ratio

How should abnormal items be treated in the trading account?

• Ignore them completely

• Include them with normal items

• Exclude them and treat separately

• Value them at a higher rate

What should be done if capital expenditures are included in the trading account?

• Include them in the cost of goods sold

• Exclude them from the trading account

• Ignore them

• Add them to the profit margin