Explain the reasons or purposes of computing the value of goods lost in a fire or by theft and how should we compute the value of goods lost if there are incomplete records
|When goods have been lost in a fire or by a theft the value of such loss must be calculated for:
(a) The loss to be reflected in the trading account at the year end as a reduction of the cost of sales
(b) A claim for compensation to be prepared for insurance compensation
(c) Tax purposes.
If detailed stock records have not been kept or destroyed , the value of stock lost must be calculated using the incomplete records technique of finding a missing closing stock in a trading account. Any difference between the quantity of stock so calculated and actual stock remaining after the incident is the value of stock lost.
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