We had a vehicle that was totalled by our insurance company. We received a total loss reimbursement for it. What type of account do I post the debit to when recording the cash received, and how do I record the entry to remove it from our balance sheet?

First, check to see if you need to get depreciation expense caught up for the current year. That will depend on your depreciation method, and whether there's even any depreciation expense remaining on the vehicle. But in general, just make sure that the accumulated depreciation for the vehicle is current, up to the date of its untimely demise.

For the basic entry you're asking about, think of it as an all-cash sale of the vehicle. You'll debit Cash, of course, for the amount of the insurance proceeds.

Removing the vehicle from your Balance Sheet will take one credit (to the appropriate fixed asset account, for the original cost of the vehicle), and one debit (to Accumulated Depreciation, for an amount equal to the vehicle's total accumulated depreciation). In other words, you're deleting from the books the vehicle's cost, and its accumulated depreciation.

Now that you've got the one credit and two debits I've just described, you'll balance out the entry with a fourth item. It'll be a P & L account, and it'll be titled something like "Gain or Loss on Involuntary Conversion", or something similarly descriptive. If it's a credit, then your insurance proceeds exceeded the vehicle's net book value (cost minus acc deprec), and you have a gain; if it's a debit then you have a loss since the cash you received was less than the net book val of the vehicle.

You didn't mention any Notes Payable associated with the vehicle, but if a Note is being paid off in conjunction with this transaction, you can book that in a separate entry, or combine it with the one I've just described.

Finally, will the insurance proceeds be rolled over into a replacement vehicle? If so, this MAY bring some accounting and / or tax consequences into play. Let us know if that's the case, and I'm sure somebody here can give you the scoop on that.

Best of luck with it!

A very nice, simple explanation. :-) (It won't let me do a greenie cause I have to spread some reputation.)