I would use a separate general ledger account such as Loss from Property Damage to record all costs incurred to get the property back to its previous condition. The costs incurred will be debited to Loss from Property Damage. The amount received from your insurance claim would be credited to the same account. Other money received, such as the salvaging of materials, would also be credited to Loss from Property Damage.

If the account Loss from Property Damage ends up with a debit balance, that will be the amount of the loss. If the account has a credit balance, there is actually a gain on the property damage.

Learn Bookkeeping: Gain unlimited access to our bookkeeping seminar videos, bookkeeping proficiency exams, bookkeeping cheat sheet, visual tutorials, and more when you upgrade to PRO.