Shortage & surplus of stock

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

02 May 2018 Dear Sir,

I am a Whole seller trader. i purchased material and sale to different dealers. sometimes when i sold material some damaged part stands in my books and i transferred it to shortage & Surplus. but his Quantity remain stands and now he is increasing. So, i want to know about that can i book a loss in Profit and loss account for it?

is it possible or not?

if yes....

Then please clear the matter how can i treat this loss in my books. also suggest the entry.

Anmol Davesar

Anmol Davesar (Expert)
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03 May 2018 pass the abnormal loss entry into your trading account.

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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25 July 2025 Hey! Regarding your shortage and surplus of stock situation, here’s how it generally works for a wholesaler trader:

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### 1. **Can you book a loss for shortage of stock?**

Yes, **shortage of stock (due to damage, theft, or loss) can be treated as a loss** and shown in the Profit & Loss (P\&L) account, but you should have proper evidence/reasons for it.

* **Shortage** means you have less stock than what your books show.
* This shortage represents a **loss of goods**, so it’s an expense for your business.
* It is legitimate to **write off this loss** by debiting it to the P\&L account under “**Loss on stock shortage**” or similar heads.

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### 2. **What about surplus stock?**

* Surplus stock (more stock physically than in books) should be **added to your stock records**.
* The **surplus value is credited to P\&L as income or adjusted against shortage if any.**
* Sometimes surplus may be due to past errors in recording or physical counts.

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### 3. **Accounting entries:**

* For **shortage (loss)**:

```
Loss on Stock Shortage A/c Dr. XXX
To Stock A/c XXX
(Being loss on shortage of stock written off)
```

* For **surplus (gain)**:

```
Stock A/c Dr. XXX
To Gain on Stock Surplus A/c XXX
(Being surplus stock added to books)
```

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### 4. **Important points:**

* You should investigate the **cause of shortages** (damage, theft, errors).
* Maintain **proper documentation** to justify writing off losses.
* Regular physical stock verification helps reduce discrepancies.
* Consult your auditor/accountant to comply with accounting standards and tax implications.

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If you want, I can help draft the journal entries tailored to your exact case. Does that sound good?

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