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Accounting treatment

Priyanka Dey (Accounts Executive ) (26 Points)

20 May 2014

I am running a jewellary business ...I am facing a trouble regarding loss of stock..like all other manufacturing business there is also a normal loss while making the ornaments .bit unlike other business this normal loss is used as payment to the job workersso its a part of my cost of goods sold ..so my question how to account for the same .

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4 Replies

Income Tax Wala: (Fin. Expert) (Chartered Accountants) (2010 Points)
Replied 20 May 2014

PASS AN ENTRY AS FOLLOWS

NORMAL WEAR & TEAR A/C DR.

TO CLOSING STOCK/ PURCHASE

Danish (GST Practitioner) (219 Points)
Replied 20 May 2014

hi Priyanka,

you can account it in manufacturing voucher, and Account like consumption --> production

Then it will deduct consumption part from Stock, and add production to the stock.

hence the amount of loss of weight in the production deducted from stock it will automatically reflect in your trading account as cost of production. no need to do any additional entry

Priyanka Dey (Accounts Executive ) (26 Points)
Replied 21 May 2014

Hii

Danish ..thanks for ur reply ..I did exactly wht u said as I worked in acct dept earlier for a long time ..but for my own business i faced trouble at income tax assessment ..the assessment officer is saying as I am nt charging anything seperately in my trading account ..I am concealing the cost ..i failed to make him understand the implication of normal loss considered in cost of production ..thts why I wanted to be doubly sure abt it ..thanks again..