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(b) Amount of insurance claim
Because there is no average clause, then, the insurance claim will be the lower of
sum insured and actual loss.
(i) When the sum insured was TZS 3,000,000:
The lower between TZS 3,000,000 and TZS 3,080,000 is TZS 3,000,000.
Insurance claim is therefore TZS 3,000,000
FOR ONLINE READING ONLY
(ii) When the sum insured was TZS 4,000,000:
The lower between TZS 4,000,000 and TZS 3,080,000 is TZS 3,080,000.
Insurance claim is therefore TZS 3,080,000

Exercise 2.5
LANGUAGE EDITING
1. On 20 October 2022, the business premises of Amani Ltd. were affected by fire.
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The following information were obtained from the accounting records:
Details TZS

Inventory of goods at 10% lower than cost as at 31 March 2022 432,000
st
Net purchases from 1 April – 20 October 2022 560,000
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st
Net sales from 1 April – 20 October 2022 1,240,000
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st
Additional information:
(a) Purchases up to 20 October 2022 did not include TZS 80,000, which relates to
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invoices yet to be received from supplier, although, goods were received in the
store on 19 October 2022.
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(b) Records show the gross profit rate of 25%.
(c) The value of goods salvaged from fire was TZS 62,000.
(d) Amani Ltd. insured their inventory to the extent of TZS 200,000.

Required: Compute the amount of insurance claim.
2. On 12 June 2023 fire occurred at Nuru’s shop. Most of the inventory were
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destroyed. The value of inventory salvaged was TZS 448,000. Furthermore, an
additional inventory was salvaged in a damaged condition and its value was agreed
at TZS 420,000. To help determine the amount of insurance claim, Nuru has made
available the following additional information:
(a) His inventory at the close of account on 31 December 2022 was valued at TZS
st
3,340,000;
(b) His purchases from 1 January 2023 to 12 June 2023 amounted to TZS
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st
4,480,000;
(c) Sales during the period to 12 June 2023 amounted to TZS 6,160,000;
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(d) On average he earns a gross profit of 30% of sales; and
(e) Has insured his inventory for TZS 2,400,000.

Student’s Book Form Five
66

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