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If a clothing firm sale its waste

Atharv Sankliya (1359 Points)

04 February 2022

if a clothing firm sale its waste/useless cloths as scrap what is the accounting treatment

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15 Replies

sabyasachi mukherjee (27723 Points)
Replied 04 February 2022

Please post actual values alongwith original entries.

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Nidhi (Chief Accountant) (3150 Points)
Replied 04 February 2022

Cash/Bank Dr.
to Sales A/c..

CHANDNI JAIN (CA Final Student) (171 Points)
Replied 04 February 2022

Mr. Atharv ,The journal entry for sale of scrap would be:

Bank a/c. Dr. ---

To scrap sale a/c. ----

Where, the scrap sale would be shown as other income at the credit side of P&L a/c , as miscellaneous income. It will be known as the operating income if it is the normal scrap which ordinarily occurs during the year,But if it is from the sale of scrap occurring from abnormal loss then it will be shown as "deduction from the abnormal loss " on the dr. side of the p&l account.i.e. the total abnormal loss amt. will get reduced by scrap sale amt. and the balance will be shown as abnormal loss at dr. side of p&l account.

I hope this helps you.

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Eswar Reddy S (CFO- at NHTF) (58275 Points)
Replied 05 February 2022

The entry is as usual .

Debtors a/c Dr
To Sales

Cash/Bank Dr
To Debtors

This is applicable if the credit period allowed

Generally for scrap credit will be allowed .So this may or may not be cash sales & there can be credit sales also.

sabyasachi mukherjee (27723 Points)
Replied 05 February 2022

This is a scrap sale entry.
let's explain the basics
1. You receive the money in bank .
as per Golden rule of accounts.
Bank is debited
dr. what comes in
2. sale is a nominal account.
sale is credited.

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Eswar Reddy S (CFO- at NHTF) (58275 Points)
Replied 05 February 2022

The question asked about sale of scrap

Debtors a/c Dr

To Sales

Receipt entry will be on realisation of funds

sabyasachi mukherjee (27723 Points)
Replied 05 February 2022

All journal entries are as per golden ŕule of accountancy.

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Eswar Reddy S (CFO- at NHTF) (58275 Points)
Replied 06 February 2022

Specify whether it is cash sale or credit sale

Ks (Ac) (138 Points)
Replied 10 February 2022

what are that abnormal loss ??

CHANDNI JAIN (CA Final Student) (171 Points)
Replied 16 February 2022

See the normal loss in any business is the normal wastages occurring during the daily operations of any entity. Which are unavoidable, hence they constitute the cost of goods sold ,i.e. these normal wastages are never separately shown in the trading or p&l a/c .

While the abnormal loss is the loss or wastages which does not occur during the ordinary course of business Eg. Loss due to fire burst out in factory, material loss due to machinery breakdown, loss on sale of any fixed asset or investment of the entity etc.i.e. the loss occurred because of any non routine event ,which may or may not be uncontrollable.

These abnormal losses are always separately shown in the p&l a/c as follows:

(A) abnormal loss. Dr. ---

To trading a/c. ---

(B) p&l a/c. Dr. ---

To abnormal a/c. ---

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Ks (Ac) (138 Points)
Replied 16 February 2022

ok A laptop shop incurred loss due to fire of Rs 2 lacs and they sell that damaged laptop worth Rs 2 lacs as scrap and the value firm get is just Rs 20 thousand so what are the adjustment does they directly adjust the scrap income in loss due to fire a/c and then transfer the balance of 1.8 lacs to the p&l a/c ??

CHANDNI JAIN (CA Final Student) (171 Points)
Replied 16 February 2022

Yes , this is the treatment.

They will first cr their trading account by 1.8 lacs as loss by fire and then dr. their p&l a/c by the same amt 1.8 lacs

Ks (Ac) (138 Points)
Replied 16 February 2022

and we can debit the p&l by loss by fire a/c rs 2 lac and credit the p&l a/c by 20 thousand as income from sale of scrap ???

does it is appropriate adjustment ??

CHANDNI JAIN (CA Final Student) (171 Points)
Replied 16 February 2022

I think it is better to net off the position..But I think neither any AS says to show the extraordinary event as net of any income arising because of it....So you may show separately ...