Expert: Ed McFarland - 4/23/2006

Question
I have rental property. Recently, I received cash from insurance company for fire damage of property. Now I do not know how to enter it in bookkeeping. What to credit what to debit. As I understand, cash (bank) will be debit, and insurance expense (credit), but it will increase my net income. Is it right?

Answer
Realize that this is a special one time event, at least you hope so.

You'll set up an insurance settlement account and later when it comes time to do your taxes, you'll enter an insurance loss and offset it by the proceeds.

Double check with your accountant, but it shouldn't increase your income for tax purposes.

Good luck