Treatment of abnormal loss in final accounts .

Treatment of abnormal loss in final accounts

   Abnormal loss of stock is also an accounting transaction and has to be brought into the books of account through a journal entry.

DEBIT-ABNORMAL LOSS A/C

Abnormal loss stock is also an asset whose value is degraded .The organisation would make efforts to liquidate the assets in a number of ways like selling the salvaged stocks, get insurance realisation etc. An account by name Abnormal Loss is used for holding the value of asset. This asset is created by debiting the value of  Abnormal stock to Abnormal loss a/c.

CREDIT

The value of  abnormal stock represents the value of stock that been used for purpose other than trading or more appropriately stock that has not been used for trading.

To ascertain cost of goods sold, the value of stock used for the purpose other than trading has to be deducted from total value of goods by crediting one of the following ledger accounts.

·         Trading a/c

·         Cost of goods sold a/c

·         Purchase a/c

·         Stock lost a/c

Which account is credited is dependent on what comprises the value of abnormal loss stock and the account in which related value exists at the time of recording the entry.