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What is Abnormal Loss of Goods?

Abnormal loss is that loss which could have been avoided. It occurs because of negligence, carelessness, theft, mischief, fraud of employees or inefficiency. Examples of abnormal loss are destruction of goods by fire, theft, breakage, loss of goods because of mishandling etc. Loss of this nature is to be treated by the consignor separately. It is not to be apportioned on the amount of unsold stock. The cost of goods lost because of abnormal or avoidable reasons is ascertained in the same manner as cost of unsold stocks is ascertained. This value is debited to Abnormal Loss Account and created to Consignment Account. The following entry is passed to record abnormal loss of goods:-

Presentation on Consignment Presented by student of Commerce Departme…

image source: image.slidesharecdn.com/actual-150501135216-conversion-gate02/95/presentation-on-consignment-presented-by-student-of-commerce-department-bzu-multan-19-638.jpg%3Fcb%3D1430506395

Consignor’s Books

Abnormal Loss A/c…..Dr

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To Consignment A/c

Consignee’s Books

No Entry

It is to be noted here that abnormal loss account is finally closed be debiting the balance of this account to the Profit and Loss Account after giving credit for any amount received from the insurance company. The entry will be:-

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Insurance, Company…..Dr

(Claim accepted by Insurance)

Abnormal Loss…..Dr

(Loss after setting claim)

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To Consignment A/c

(Total Loss of Goods)

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