Normal and abnormal loss
Certain losses are inherent in the production process and can not be eliminated. These losses occur under efficient operating conditions and are considered as normal or uncontrollable losses.
In addition to losses that can not be avoided, there are losses that are not expected under effective operating conditions, such as inadequate mixing of ingredients, weaker materials, and inappropriate cutting of the clothes. These losses are not part of the manufacturing process and are an abnormal or verifiable loss.
o The normal loss during the process is a loss. No cost.
o An abnormal loss is the extra loss that occurs when the actual loss exceeds the usual or expected loss and costs.
o Abnormal profit is the gain that arises when the actual loss is lower than the usual or expected loss and is "negative cost"
Since the abnormal loss does not cost, the costs generating such units are due to good output units. Abnormal loss and profit units are evaluated in the same proportion as "good" units. Abnormal events are not there before influencing good production costs. The costs are analyzed individually in abnormal losses or abnormal profit accounts.
Loss of Value Loss
Losses have a turnover. For debris values, the following basic rules should be used when calculating the value in process accounts.
o Revenue from waste is not treated as a supplement to sales revenues, but rather as a reduction in costs.
o The value of normal loss is used to reduce process costs.
DEBIT Debris Account
CREDIT Process Loss Account
o The depreciation value of the abnormal loss to reduce abnormal loss
DEBIT debris account
CREDIT Anomalous loss account
abnormal loss debris before decreasing cost description income statement.
o The depreciation value of abnormal profit increases as the pieces sold as actual pieces will be less than the normal loss value. As there is less waste than expected, less traffic revenue is generated than the direct consequence of abnormal gains. An abnormal profit account must be entered before we load the value of the debris.
o The actual cash withdrawal from the sale of the scrap is recorded on the scrap account.
DEBIT Cash Received
CREDIT Debris Account
With cash from the sale of actual debris.
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