Treatment of Scrap in Cost Accounting :
1. If scrap cost is very low :
No, need to record. Its loss is suffered by products. Earning from selling of scrap will be other income.
2. If scrap cost have some amount which can not be ignored :
Calculate net realisable value scrap =
Total sale of scrape - Net sale and distribution expenses of scrap
Now, we deduct correct cost of material = Total cost of material - net realisable value of scrap
3. If scrap is identified with a particular job or process :
When scrap is identified with a particular job or process and its value is significant, the scrap account should be charged with full cost. The credit is given to job or process concerned. The profit and loss account in scrap account, on realisation, will be transferred to costing profit and loss account.
Scrap Report
