The correct answer is C. Stock Account.
When stock is destroyed by fire, the cost of the stock is written off as an expense. The amount of the insurance claim is then credited to the insurance account. The balance of the cost of the stock, which is the amount not covered by the insurance claim, is debited to the stock account.
Option A, Trading Account, is incorrect because the trading account is used to record the revenue and expenses of a business. The cost of stock is not recorded in the trading account.
Option B, Profit and Loss Account, is incorrect because the profit and loss account is used to calculate the net profit or loss of a business. The cost of stock is not recorded in the profit and loss account.
Option D, Bad Debts Account, is incorrect because the bad debts account is used to record debts that are considered to be uncollectible. The cost of stock that is destroyed by fire is not considered to be a bad debt.