Q.Goods costing ₹20,000 were destroyed by fire; the insurance company admitted a claim of only ₹14,000. The amount debited to the Profit and Loss Account as a genuine loss is:
(A) ₹20,000
(B) ₹14,000
(C) ₹6,000
(D) Nil, since insurance was taken

Only the shortfall between the cost of goods lost and the claim admitted is a genuine, unrecoverable loss; the claim amount itself becomes a receivable, not a loss.

The full ₹20,000 cost is credited to the Trading Account (removing the destroyed goods from cost of goods sold), but only the UNRECOVERABLE portion is a genuine loss: ₹20,000 − ₹14,000 = ₹6,000, debited to the Profit and Loss Account. The ₹14,000 claim admitted becomes a Current Asset (Insurance Claim Receivable), not a loss.

Option-by-option analysis:

• (A) Incorrect — this ignores the admitted claim entirely. …