The first of these accounts represents the amount paid by the concern for insurance on its own property against fire and tornado and on rents. Insurance paid on contracts should be charged direct to the various purchasers. The second account represents cash paid by the concern for insurance on mortgaged properties. The items composing it are charged to the respective expense accounts in the mortgages receivable ledger. It is an asset of the concern and consequently should appear in its proper place on the balance sheet.

When damages are collected for insurance other than against fire, the accounts to be credited vary; but if the insurance is for rents, the amount paid by the insurance company is, of course, credited to Rent account. Damage to buildings caused by fire or tornado is sometimes repaired by the insurance companies, or an amount agreed upon may be paid in cash. In the first case, no entry is required on the books beyond a memorandum in the rent sub-ledger stating the facts. In the second case, if repairs have been made by the concern, the cost of them would naturally be charged to Repairs account, and the amount received from the insurance company should be credited to the same account.

In the event of total loss, where the property is owned by the concern and is not involved in any time sale, the insurance received is credited to Property account; but if the property is subject to a time sale, it must be credited to the account of the purchase, i.e., either to the contract or to the principal of the mortgage. If any arrangement is made with the purchaser to allow him the use of this money for the purpose of rebuilding, all amounts so advanced should be debited to the same account as received the credit.

In cases where the number of total losses is large, it is advisable to open a special insurance account, to which are credited all amounts collected for losses.