Indemnity accounting?

[Cam Ellison]

David Bear wrote:
> This may be a question for an accountant. However, I would create an expense
> account the represents the 'accident'. Expense accounts normally have a
> debit balance but there's nothing to say that they cant have a credit
> balance. Record the deposit as a debit to your cash account and a credit the
> the expense account. Then, all future charges related to the accident will
> be debited to the expense account. In the end, you will know whether you
> came out ahead on the settlement.
> 
> And it is my understanding that insurance settlement payments of this nature
> are not considered income. (at least in the US)

Also in Canada.

In any case, as I understand such things, insurance settlements are to 
compensate you for something you have lost (an object, or your mobility, 
employability, health, life, etc.) or may lose (health, etc.) as a 
result of the accident or whatever.  For personal injury settlements, 
the idea is that you invest the money so that when your body gives out 
on you prematurely because of long-term effects of the injury you can 
afford the extra medical care, or whatever.  It's not earned in any 
usual sense of the word, hence it is not income.

Cheers

Cam


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Cam Ellison, Ph.D. R.Psych. #1417

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