A truck written off after an accident
How a transporter records a truck written off after an accident, the insurance claim while it is open, the payout, and any finance still owing.
By Achekam · · 5 min read · For Logistics businesses in South Africa, Nigeria, Kenya
The call comes in at night. Nobody is badly hurt, thank goodness, but the truck rolled on a wet bend and the assessor's verdict a week later is the one every operator dreads: uneconomical to repair. The horse is a write-off, the trailer may be salvageable, the load is a separate claim, and the bank still holds a finance agreement on the vehicle with years left to run.
The operational side of a write-off, replacing capacity and keeping customers moving, gets everyone's attention. The accounting side often gets none until year end, when the auditor asks why a truck that no longer exists is still on the register and still being depreciated. This article sets out the entries in order, from the day of the accident to the day the payout lands, and the papers to keep along the way.
Disposing of the asset with the loss posted
From the date the vehicle is declared a write-off, it is no longer an asset the business can use. Take it off the fixed-asset register as at that date.
In Achekam, the fixed-asset register lets a business add assets at cost, depreciate them monthly by straight line or reducing balance with a journal each month, and dispose of them with the profit or loss posted. Disposing of the written-off truck does three things:
- it stops the monthly depreciation, so no further charge is posted for a vehicle you no longer have;
- it removes the truck's cost and accumulated depreciation from the books;
- it posts the loss on disposal, which is the carrying amount you have just lost.
Do not wait for the insurer before disposing. The loss of the truck and the insurance recovery are two separate events, and the second may take months. The IFRS Foundation's summary of IAS 16 Property, Plant and Equipment explains how property, plant and equipment is recognised and measured, including depreciation charges and impairment losses, and is the framework your accountant will use to judge the timing.
Achekam does not work out tax wear-and-tear, so the tax effect of the write-off is calculated separately with your accountant.
An insurance receivable until the payout arrives
Once the insurer has accepted the claim and the amount is reasonably certain, the business is owed money. Record that as a receivable with a manual journal:
| Debit | Credit |
|---|---|
| Insurance claim receivable (asset) | Insurance recoveries (income) |
Each business has its own chart of accounts and can add accounts, so create an "Insurance claim receivable" account if you do not have one, and decide with your accountant whether the recovery shows as its own income line or alongside the loss on disposal. Achekam refuses an unbalanced journal or one dated in a closed month, so post it in the month the claim is accepted, before that month is closed.
If the insurer has not yet accepted the claim at a month end, do not book a receivable on hope. Note the open claim for your accountant instead; uncertain recoveries are a judgement for them, not the bookkeeper.
A write-off, in words
A truck is written off in the middle of the month. The bookkeeper disposes of it in the register as at the accident date, and the register posts the loss of its carrying amount. Six weeks later the insurer confirms the settlement amount, and the bookkeeper posts a journal raising the receivable against insurance recoveries. The next month the payout arrives in the bank and is matched to the receivable, which clears to nil.
The payout on the bank statement
When the money arrives, import the bank statement and match it. Bank lines in Achekam are matched by suggestion and a person accepts each match; a line not yet in the books becomes a suggested journal a person approves. The person approving the payout line should post it against the insurance claim receivable, not against income a second time.
Check the amount carefully. Insurers deduct excesses and sometimes salvage value, and may pay part of the settlement to the financier rather than to you. Any difference between the receivable you raised and what arrives needs a small adjusting journal and a note of why. A posted journal is corrected only by a reversal, so if the receivable itself was wrong, reverse it and post the right figure.
Any finance still owing
A written-off truck does not cancel the finance agreement. Until the financier is settled, the loan or instalment balance stays in your books as a liability, whatever has happened to the vehicle.
Common outcomes:
- The insurer pays the financier directly. The payment settles the finance balance, and only any surplus reaches you. Record the settlement against the finance liability, using the financier's settlement letter as support.
- The payout is less than the finance balance. The shortfall is still owed and is paid from the business's own funds or refinanced. This is where gap or shortfall cover, if you had it, earns its keep.
- The truck was paid off. The whole payout comes to you.
Ask the financier for a settlement figure as at the payout date, and reconcile it to your own loan account. For how financed trucks are recorded in the first place, see financed truck instalments.
Documents to keep for the claim
Insurers, auditors and sometimes the tax authority will want to see the trail. Keep together:
- the accident or police report and its reference;
- the driver's statement and any witness details;
- photographs from the scene and the assessor's report;
- tracking or telematics data for the trip, if you have it;
- the insurer's settlement letter and any correspondence on the excess and salvage;
- the financier's settlement figure and confirmation the agreement is closed;
- the disposal entry from the register and the journals that followed.
Next steps after a write-off
Dispose of the truck in the register as at the date of loss, keep the claim file complete, book the receivable only when the claim is accepted, and settle the finance in your books against the financier's letter. Then update the fleet plan: the replacement truck goes onto the register at cost, as described in depreciating trucks and trailers each month.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
