when normal loss is not scrapped, what will be the treatment in the statement of equivalent production?will it be assumed to be completed units?
Surya Narayan (Student ) (51 Points)
21 August 2008when normal loss is not scrapped, what will be the treatment in the statement of equivalent production?will it be assumed to be completed units?
S.Srinivasaraghavan
(Chief Financial Officer and Co)
(11318 Points)
Replied 21 August 2008
In the case of financial statements it will be inherently reflected as reduction in consumption of materials. In the case of production account ithe normal loss should still be debitted and transferred to costing profit and loss account as abnormal gain.
CA Naveen Kumar Agrawal
(Chartered Accountant / MBA)
(939 Points)
Replied 22 August 2008
| Originally posted by :S.Srinivasaraghavan | ||
| " | In the case of financial statements it will be inherently reflected as reduction in consumption of materials. In the case of production account ithe normal loss should still be debitted and transferred to costing profit and loss account as abnormal gain. | " |
I m not agreed at all wid the answer of Mr. S.Srinivasaraghavan
As i think fit the answer is
In case of normal loss there is no need of recording any entry (if scrap is not saleable) in Financial as well as cost Records. Loss will be automatically booked in the records in the form of higher cost of production of completed units(finished goods). Units Lost normally in the production process is not considered at all while calculating Equivalent Units. Surya it will not be assumed to be completed units. and only in case of Abnormal Loss(and not in case of normal loss), Costing P & L A/c is Debited with respactive amount of Loss in Cost Records.
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