How to Book Insurance Proceeds in QuickBooks

The business owned a boat that sank and was a total loss. The insurance company paid the remaining loan off directly, then issued us a check for property loss. So I need to deposit that check. When the original loan was set up years ago, it was not set up through Loan Manager. The monthly checks were written and charged to the "Boat Lease" expense account. I don't see any indication of transactions other than the monthly checks being written for the lease payments using the "Boat Lease" expense account. I am wondering what is the correct way to deposit the insurance proceeds check as for the "From Account" field. It doesn't 'feel' right to select the 'Boat Expense' account. We do not have an 'insurance proceeds' account on our general ledger at this time. I could enter it as non-fee income, I suppose, and then describe what it is, or create a new account called 'insurance proceeds'? What is the correct method?
I’m not a CPA and don’t give tax advice, so you should check with your own tax advisor.

You should create a journal entry to $0 out the balances in the loan account, the fixed asset account and the depreciation account. To balance the journal entry, you'll probably need an other revenue or expense account for the realized gain or loss.

Here's an example:

Fixed asset – $50,000
Depreciation – $25,000
Loan – $20,000
Insurance proceeds – $20,000 loan payoff + $10,000

In this case, you'd credit $50,000 to the fixed asset account and debit $25,000 to the depreciation account and $20,000 to the loan account to clear out those balances and also debit $10,000 to cash.  The $5,000 credit difference would be booked to an other revenue account.

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This article is provided for informational purposes and is not intended to be construed as legal, accounting, or other professional advice. For further information, please consult appropriate professional advice from your attorney and certified public accountant.

Ruth Perryman - QuickBooks Specialist Written by +Ruth Perryman

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