222

$show=home

Welcome to Accounting Education

The Accounting University with 3400+ Accounting contents as study material which can watch, read and learn anyone, anywhere.

Start your studies

$show=home

Latest $type=three$count=6$author=hide$comment=hide$label=hide$date=hide$show=home$s=0

Journal Entries $type=three$count=6$author=hide$comment=hide$label=hide$date=hide$show=home$s=0

Balance Sheet $type=three$count=6$author=hide$comment=hide$label=hide$date=hide$show=home$s=0

Treatment of Normal and Abnormal Loss in Process Costing

http://www.krantikari.org/2016/09/cost-accounting-ebook.html
 When we start the production of goods through different processes, normal loss and abnormal loss will happen with this. Due to this our total cost of production will increase.
If we do not treat the normal and abnormal loss, our total cost of production will less than exact cost of production. Due to this, our sale price will not estimate correctly. So, for making good plan of selling and controlling our losses, we need to treat the normal loss and abnormal loss in process accounts.

 1. Treatment of Normal Loss in Process Accounts 

 Normal losses are those which we can not stop. These are natural wastage.

 For example, if you doing the business of timber on the basis of their weight. It is sure that after cutting of tree, weight of wood will decrease. So, this loss is normal loss. In process account’s credit side, we just show the normal loss’s units. Now, our total produced units will decrease. This will increase our cost of production per unit in any process. For example: If total cost of process A is Rs. 10,000. When we produce 100 units in A process, we have checked that due to natural reasons, we have just 90 units. Now, in A Process Account, we will show 100 units in debit side and 10 units of normal loss in credit side without writing its amount. Due to this our total cost of Rs. 10,000 will of 90 units. It means, cost per unit has increased from Rs. 100 per unit to Rs. 111 per unit.

 2. Treatment of Abnormal Loss in Process Accounts

 All those losses which happen due to abnormal reasons are called abnormal losses. Following are its main example.

 1. If you use bad quality raw material in the production, there is big risk of wastage in production. So, use of bad quality raw material is the reason of abnormal loss.

 2. Careless is also reason of abnormal loss. For example, due to the careless of worker, 5 units waste the products during production. So, loss of 5 units is the abnormal loss.

 3. All those losses which are not normal will be the abnormal loss. For treating the abnormal loss in the process account, we need to calculate the value of abnormal loss.

 a) When there is not any normal loss 

  Abnormal loss = Normal cost at normal production / normal output X units of abnormal loss

 b) When there is normal loss

 Abnormal loss = {Normal cost at normal production / (Total output – normal loss units)} X Units of abnormal loss. Example : In process A 100 units of raw materials were introduced at a cost of Rs. 1000. The other expenditure incurred by the process was Rs. 602 of the units introduced 10% are normally lost in the course of manufacture and they possess a scrap value of Rs. 3 each. The output of process A was only 75 units. Prepare process A account.

                                               Process A Account

Debit Side Units  Amount in Rs.  Credit Side Units  Amount in Rs.
Raw material 100 1000 Normal Loss 10 -
Other Expenses - 602 Sale of Scrap of normal wastage 10 units X Rs. 3 each -  30
*Abnormal Loss 15 262
Process B ( Output ) - balancing figure 75 1310
100 1602 100 1602

* Calculation of Abnormal loss in units and in value

Total input========== 100 units
Less normal loss in units== 10 units
--------------------------------------
Normal Output ======== 90 units
actual output of A process = 75 units
--------------------------------------
Abnormal loss in units ==== 15 units
==========================
 Value of Abnormal Loss
= Cost of Total Output - scrap sale of normal loss/ Normal Output X Units of Abnormal loss
= 1602 - 30 / 90 X 15 = Rs. 262

Related : Process Costing 

Comments

: 11
  1. i need the email for accounting education

    ReplyDelete
    Replies
    1. email of accounting education is vinod@svtuition.org and svtuition@gmail.com

      Delete
  2. Extra Cost of Sales
    Opening Stock 221,983,990 91,256,642
    Purchases Raw Materials 589,183,341 394,996,679
    Port agent Bo-Charges 7,792,319 10,740,650
    Electricity Bill 11,864,603 8,691,857
    Wages, Overtime & bonus 7,996,409 10,600,455
    Spairs & Maintenance 841,764 1,650,675
    839,662,426 517,936,958
    Less: Closing Stock 360,188,433 221,983,990
    479,473,993 295,952,968
    how to adjust here normal loss and abnormal loss to show the value of production cost . please help to solve
    e-mail:ipcb.bd@gmail.com

    ReplyDelete
    Replies
    1. What if in a situation where the percentage of normal loss is not given.

      Delete
    2. If a % of normal loss is not given.then their might be given the percentage or value of total loss .and also their is the point of abnormal loss.
      You can calculate the normal loss by lessing the abnormal loss through total loss

      Delete
  3. Materials issued : 1000units@₹150/unit
    Wages :₹30000
    Over heads :₹10000
    Normal loss : 5% of input
    Actual out put : 900units
    How to prepare process account

    ReplyDelete
    Replies
    1. Process Account
      Material 1000Units 150,000 Finished Goods 900Units 157,500
      wages 900Units 30,000 WIP Closing 100Units 17,500
      Overheads 900Units 10,000 Loss 50 7,500
      sales* 150 7,500

      190,000 1000Units 190,000
      assumed sale unit lost price= 150

      Delete
  4. Abnormal loss is spread on good unit of production.is this statement true or false? Give reason.

    ReplyDelete
  5. a normal lost unit, how does it affect the total cost explain and support your answer with computation?

    ReplyDelete
  6. The following expenses were incurred for the production of 1500 units of a durable products.
    Material - ₹350000
    Wages - ₹120000
    Overheads - ₹80000

    Normal wastage in the process is 2% of the input and the scrap value is ₹300 per unit. You are required to prepare process account, assuming there was no abnormal loss or gain.

    ReplyDelete
  7. Sorry how to illustration the normal loss, abdormal loss anda abdormal gan?

    ReplyDelete
In comment, you can give your feedback, reviews, ideas for improving content or ask question relating to written content.

 


Name

access,2,account,86,accountant,95,Accounting,685,accounting definitions,99,accounting ebook,3,Accounting education,85,Accounting Education Ads Help,1,accounting procedure,2,accounting process outsourcing,2,Accounting Software,52,advance,3,advertising,6,africa,7,Amalgamation,6,amendments,16,Amortization,1,announcements,62,Annuity,2,assets,53,audit,47,auditing,41,Australia,2,B.Com.,22,balance sheet,88,bank,111,Bank reconciliation,12,banking,33,basic accounting,110,BBA,1,benefits,13,best,50,bill,12,black money,3,blog,12,bloggers,7,book keeping,4,bookkeeping,3,Branch Accounting - full tutorial,8,budget,35,Budget variance,13,business,65,businessman,9,CA,30,calculator,4,canada,3,capital,72,capital budgeting,27,career,21,cash,40,cash book,8,cash flow statement,11,Chiense,1,children,13,china,6,class,3,coaching,2,coins,2,college,6,commerce,10,commerce students,7,company,36,computer,9,computer accounting,1,conference,4,Contact vinod kumar,1,Control Your Spending,27,corporate accounting,69,cost,160,cost accounting,195,cost center,8,cost centre,1,CPA,2,credit,18,credit card,11,cs,10,currency,35,data,11,Debit and credit,17,debit cards,1,debt,62,debtor,21,degree,6,depletion,2,depreciation,38,Diwali Messages,12,documents,4,dollar,5,domain,3,Downloads,3,Dubai,1,e-accounting,17,earning,17,education,246,Education Loans,6,email,15,employee,4,EPF,2,ERP,7,euromoney,1,examination,7,excel,17,excise duty,6,expenses,65,facebook,7,factor of loan,1,fans,2,feature,32,fifo,5,FII,4,fiji,1,finacle,1,finance,823,Finance Journal Entries,6,Financial,134,financial accounting,147,Financial Statements,4,fire insurance,3,flickr,2,flow,4,forensic,4,forex,21,formula,8,france,1,fraud,6,free,2,fun,34,function,1,fund,48,GAAP,36,GDP,1,gdr,5,germany,1,gold,7,goodwill,4,goodwill accounting,3,google,34,google apps,3,google apps,1,google base,1,google buzz,1,google calendar,1,Google docs,38,google finance,3,google fusion tables,1,google talk,5,govt.,5,GST,33,guide,85,health,6,Hindi,2,Hindi Language,3,history,3,holding company,3,How to treat FBT in Tally 9,1,HRA,3,ICAI,11,ICAWI,3,ICICI Bank,1,IFRS,11,income,17,income statement,19,Income Tax,7,India,57,indian railway,1,Indonesia,1,inflation,4,inflation accounting,3,infographics,8,information,7,inspiration,176,insurance,14,insurance accounting,2,Intangible,3,interest,26,international,7,Internet,40,Introduction of Tally 9,1,inventory,41,investment,135,investment in Shares,6,invoice,3,IT,1,Japan,1,Job costing,4,journal entries,143,Journal Entries eBook Help,4,Kalculate,1,keyboard,3,kuwait,2,laptop,2,law,4,LBT,1,learning,36,lease,5,lecture,11,ledger,17,leducation,1,Leverage Analysis,7,liabilities,16,lifo,3,linkedin,1,loan,74,logical point,1,loss,5,loss of profit,1,M.Com.,5,m.phil,2,malaysia,3,management accounting,129,manual accounting,4,manufacturing account,1,market,11,marketing,3,mastercard,2,material,13,MBA,14,MCA,1,media,4,migration,2,mobile,9,money,61,ms word,3,ms. excel,14,multi currency in tally 9,1,Multicurrency Accounting,3,mutual fund,30,national security,1,new and sacrifice ratio,1,new york times,1,new zealand,1,news,1,NGO,5,nonprofit-accounting,6,North Georgia Mountains,1,Notification,1,NPV,17,NSE,1,odbc,2,office,10,oman,1,online application,2,online accounting,11,Online Accounting Course,6,otcei,1,pakistan,3,parents,3,Partnership,1,pay pal,3,pdf,4,Personal Finance,6,pie chart,1,pie chart of income,2,pnb,5,podcast,1,ppf,1,presentation,10,price,7,privacy policy,2,prof. vinod kumar,13,profit,24,profit and loss account,12,project management,11,provision,14,purchase,9,puzzles,2,quickbooks,3,Quote,22,quotes,42,quotes of svtuition,1,rating agency,2,ratio analysis,34,RBI,7,readers,13,real estate,13,rectification of errors,11,remote control,2,reports,10,reserves,8,responsibility accounting,4,retirement,2,revenue,3,Revenue reserves,2,review,7,risk,11,rupees,9,salary,5,sale,12,SAP,3,saudi arabia,1,saving,19,sbi,9,scholarship,2,school,1,SEBI,13,security,30,service tax,23,share,20,share trading,15,Shares,16,shri lanka,3,singapore,2,sms,6,social accounting,7,society,5,solution,219,South Africa,1,stock,24,stock exchange,22,structure,6,student,39,students,70,study,21,subsidiary company,2,svtuition,14,swiss bank,2,tally,100,tally 9,8,Tally 7.2,8,Tally 9,42,Tally.ERP 9,59,TallyPrime,1,tanzania,2,tax,94,Tax Accounting,30,TDS,15,teacher,62,teaching,112,technology,33,test,40,testimonial,15,testimonials,15,thailand,1,tips,60,trading,5,trading on equity,2,transaction,7,trend,12,trial balance,14,truthfulness,1,tuition,3,twitter,10,UAE,5,UGC - NET Commerce,13,UK,11,United Arab Emirates,1,university,9,usa,25,valuation,9,VAT,22,Video,36,Voucher and vouching,4,Wealth,8,wikipedia,25,working capital,29,youtube,14,
ltr
item
Accounting Education: Treatment of Normal and Abnormal Loss in Process Costing
Treatment of Normal and Abnormal Loss in Process Costing
https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiHIJC3-9YRGMUXfpYb9BnMEYxhPlaNor4S1T7L7JMMNzDPvzokwbslbr9GAenRJoNAbaAgaqsaarRXwdXMZVeaqkdh0_tofshZZcVcJeQn62dhnxHITSYVrcT1ZZ5WlhO2vGPIYb53RGs/s1600/cost+accounting+ebook+promotion.PNG
https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiHIJC3-9YRGMUXfpYb9BnMEYxhPlaNor4S1T7L7JMMNzDPvzokwbslbr9GAenRJoNAbaAgaqsaarRXwdXMZVeaqkdh0_tofshZZcVcJeQn62dhnxHITSYVrcT1ZZ5WlhO2vGPIYb53RGs/s72-c/cost+accounting+ebook+promotion.PNG
Accounting Education
https://www.svtuition.org/2012/10/treatment-of-normal-and-abnormal-loss_29.html
https://www.svtuition.org/
https://www.svtuition.org/
https://www.svtuition.org/2012/10/treatment-of-normal-and-abnormal-loss_29.html
true
2410664366776677676
UTF-8
Loaded All Posts Not found any posts VIEW ALL Reply Cancel reply Delete By Home PAGES Contents View All RELATED CONTENTS FOR YOUR LEARNING Topic ARCHIVE SEARCH ALL POSTS Not found any post match with your request Back Home Sunday Monday Tuesday Wednesday Thursday Friday Saturday Sun Mon Tue Wed Thu Fri Sat January February March April May June July August September October November December Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec just now 1 minute ago $$1$$ minutes ago 1 hour ago $$1$$ hours ago Yesterday $$1$$ days ago $$1$$ weeks ago more than 5 weeks ago Followers Follow THIS PREMIUM CONTENT IS LOCKED STEP 1: Share to a social network STEP 2: Click the link on your social network Copy All Code Select All Code All codes were copied to your clipboard Can not copy the codes / texts, please press [CTRL]+[C] (or CMD+C with Mac) to copy