I would use a separate general ledger account such as Loss from Property Damage to record all costs incurred to get the property back to its previous condition. The costs incurred will be debited to Loss from Property Damage. The amount received from your insurance claim would be credited to the same account. Other money received, such as the salvaging of materials, would also be credited to Loss from Property Damage.

If the account Loss from Property Damage ends up with a debit balance, that will be the amount of the loss. If the account has a credit balance, there is actually a gain on the property damage.

About the Author: Harold Averkamp (CPA) has worked as an accountant, consultant, and university accounting instructor for more than 25 years.

He is the creator of the AccountingCoach Pro which has been praised for its ability to simplify accounting in a way that anybody can understand.

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