Insurance is a necessity in any business. On successful insurance claims, a payment is normally made to the insured but small businesses have no clue, as to how, to account for insurance settlements. Most businesses reflect the payment as income and this is something that would violate International Accounting Standards. Since the transaction has everything to do with assets and nothing to do with income, it should be adjusted against assets. Erroneous accounting for assets might prejudice the business further in future, if similar insurance claims are made. You should always consider advice from a chartered accountant before you will choose a business insurance plan.
Insurance companies settle claims on assets, on its book value and not its costs. The principle might be different from country to country but book value is widely accepted as the norm. There’s a problem with small businesses because they fail to maintain proper fixed assets registers and then insurance companies perform desk top valuations, or make an estimate, on the book value, mostly much lower than its real book value. This is not too good if something unwanted would happen to your business. So, if you own a small business, you should always talk to your accountants and do the right things before you’re planning to buy a business insurance plan. There are a lot of accountants around the world and i can’t say if there’s a company that is perfect with this. You should always choose a regional accountant because they know how to handle the situation from your area better than anyone else. For example, if you’re staying in south west England, you should choose a Bristol Accountant and if you live in the northern parts of Scotland, you should go for a Inverness Accountant. Choosing a business insurance plan it’s not too easy and it’s always great if you get professionals to help you with this.
Tags: Accounting for Insurance, Business Insurance, insurance accounting
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