Comprehensive insurance claim
April 7, 2011 | 40,00 EUR | answered by Dipl.BW/SB Ulrich Stiller
I am a freelance translator and in January I had a total loss with my company car. The old car was new, 1.5 years old and cost 8,600. Thanks to full comprehensive insurance, I received 6,000 euros + 2,000 euros for the sale of the old car from the insurance company. Now I have bought a new car for 9,200 euros. Do I now only have to deduct the difference of about 1,200 as a business expense or do I have to deduct the total amount as an expense and then record the reimbursement from the insurer plus the sale proceeds as business income?
Dear Client,
Thank you for your inquiry, which I would like to answer based on the information provided and considering your use within the scope of an initial consultation as follows:
If the vehicle was used for business purposes for more than 50%, it constitutes necessary business assets. The newly acquired vehicle also constitutes necessary business assets if it is used for more than 50% for business purposes.
You must book as follows, assuming that the insurance benefit of 8,000 euros has been deposited into your bank account:
First, you must calculate the remaining book value of the old car as of January 2011 by depreciating it with 1/12 of the annual depreciation. The resulting amount is the remaining book value. You book the vehicle as follows based on the remaining book value:
Account Book value disposal motor vehicles in debit to account motor vehicles in credit.
The balance of the old vehicle on the motor vehicles account is then zero. Next, you book the receipt of the insurance benefit:
Bank account in debit 2,000 euros to account revenues from asset sales in credit 2,000 euros.
Bank account in debit 6,000 euros to account other income in credit 6,000 euros;
You now book the new vehicle as follows:
Account motor vehicles in debit 9,200 euros to bank in credit 9,200 euros.
The vehicle must be depreciated by the end of the year at the latest according to the usual useful life.
I hope I was able to assist you.
Best regards
Ulrich Stiller
Tax advisor/Diploma in Business Administration
