how to enter homeowners insurance claim check

Jim, I know how to setup something like that, but the payment is still going to show up as income until such time as I pay it out to contractors, which at the rate I'm going finding one, could take a long time :{. There must be some way to handle payments like this which are advances against a future expense, without Quicken calling it income. I just can't figure it out. I have H & B if that's any help.

I think the advance is some kind of liability account, since it really isn't going to be my money eventually.

jo

You set it up as a liability account. I don't know H&B, but under Quicken 2005 it would show up in the Property & Debt center.

Let me turn the question around --- If you paid the expenses before collecting the insurance, how would you handle it?

Handled as I described it (the insurance payment), it is a reduction of expenses, not income. Enjoy! Jim M.

You should enter it is a negative expense. When you eventually post the expenses, this category will eventually go positive unless your expense is less than the reimbursement.

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Been following this thread, and have a question or two ... to sort of stir the pot.

I said liability rather than go into theory, but technically the insurance is a deferred credit which is on the balance sheet as a current liability. When you suffer the loss, you record a debit to casualty loss and a credit to the asset suffering the loss. You then record an account receivable with a balancing deferred credit. Regardess of what you spend the money on, when it's received you close out the deferred charge against the loss because you've been repaid for at least that part of the loss. You then record the expenditure for the trip to Cancun or whatever.

Please stop showing off your accounting expertise...the tax season is over . Seriously, though, Quicken is not designed for accountants, and you don't need to know debits and credits to use it. The simplest way to handle this is to record the receipt as a negative expense, and simply charge expenses to the same category as they are paid.

To "stir the pot" one more time ---- As you have probably concluded, there is no "right" or "proper" way to handle the situation you described. (although some may think so) I suggest you use whatever technique you feel comfortable with so long as you understand what the financial statements say (and what they don't say). Understanding your financials is all that matters. Jim M.

But it IS income. It's just not taxable income.

"danbrown" wrote

True.

False. It certainly COULD be taxable, under certain (rather common) circumstances.

Since OP wanted to not enter it as income, I stayed out of this thread, until now. Since I'm here, may I suggest to OP to enter it as an income category (mine is "Insurance Settlements") and assign a class to that category, as well as the expense categories (including that trip to Cancun). This way, a class report will give the status of this incident and won't affect other categorized reports that don't include the class. Wanting the net worth to be unaffected until the insurance money is spent is asking Q to ignore what is actually happening in R/L, IMO.

Thank you all for your suggestions and explanations. I like Charlie's even if I don't use it because I want to understand the accounting principle behind this kind of thing.

I don't think I'll be taking any trips to Cancun

jo

"Thank you all" --- jo phillysleuth Phillys Leuth or the Sleuth from Philly!

"even if I don't use it" - I finally figured it out. You took your money out of the bank, deleted all related quicken transactions and put the cash in a cookie jar!

Jim, Is this supposed to be humor? I hope so.

Jo

address

"vodil" wrote

Good grief. What is the logic in that?

The logic is quite simple. There was some damage done to the asset which lowered its value. So the event creates an unrealized loss. When you spend the money to fix it you are restoring the value of the asset. If you do it with double entry systems as the accounting whiz suggests you need another account or two. (I did it this way because I had a 6 figure loss and had to pay a contractor etc.)

"vodil" wrote

You're confusing the expense required to repair the damage with the actual affect in value of the property. They are not the same thing. In fact, the differences in these two values earns many rehabbers/investors a nice living.

Also, the amount of the claim check is not necessarily the amount required to repair the damage. It might be more or less.

Let's say the damage was estimated by the adjuster to be $10K. OP has a deductible of $1K, so the check is for $9K.

Now, OP gets estimates to repair the property EXACTLY AS DESCRIBED IN THE INSURANCE CLAIM (although that's not what most people do, but let's keep this example simple). OP gets 3 estimates. All of the contractors are verified to be equally competent; their proposals are identical, except for the prices. The bids are $8K, $9K, and $10K. Of course, OP goes with the low bidder, since all else is equal.

This is a very simple example, with only $1K increments in the repairs, but possibly $10K - $20K difference in the market value affect of the asset account.

Or, OP does all the work at a materials cost of $1K. Part or all of the $8K difference may be a taxable gain (OP's labor does not reduce this gain). And, yes, people really do this and go to Cancun or whatever with the rest.

The asset account is not the appropriate instrument for the insurance claim check transactions.