Working on Gold wastage during Melting of old gold jewellery

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When melting old gold jewellery, a certain amount of gold is lost due to stones, impurities, and the refining process. To account for this loss, you should credit the karigar's gold account to reflect the returned weight and debit a 'Melting Loss' account for the difference. If using accounting software, a stock journal entry can adjust the inventory, moving the lost gold from old jewellery stock to a consumption or loss category.

aasit shah

aasit shah (Querist)

22 October 2026 I had issued 4256.600 gms Old Gold Jewellery with stones for melting to the karigar. Karigar melted & returned me 3989.680 gms showing loss of 266.920. how do i show loss of 266.920 gms in my books. as per transaction it is showing that still 266.920 gms is lying with karigar but actually it is loss in melting & refining.

Dhirajlal Rambhia

Dhirajlal Rambhia

(Expert)

23 October 2026 Credit the Karigar's Gold Account / Ledger:
• Reduce the karigar's balance by 266.920 grams (closing the open balance that currently shows as pending with them).
Debit the Melting Loss / Gold Consumption Account:
• Debit a nominal/expense or manufacturing loss ledger (e.g., Gold Melting Loss A/c or Manufacturing Wastage A/c) for the equivalent weight and valuation.
Pass a Stock Journal Entry (if maintaining inventory in software like Tally):
• Source/Consumption (Input): Old Gold Jewellery / Gold Scrap reduced by the melted/lost quantity.
• Destination/Production (Output): Melted Gold Bars/Poured Metal credited as 3,989.680 grams.

Dhirajlal Rambhia

Dhirajlal Rambhia

(Expert)

23 October 2026 You need to pass a Stock Journal entry (or a credit/adjustment voucher) that squares off the karigar's account and charges the weight to a melting/manufacturing loss or consumption account.

• Stones and Impurities Deduction: Old gold jewellery frequently contains stone weight, lac, wax, dust, and base metal alloy burn-off (copper, zinc, solder) that vaporize or detach during the melting and refining process. Ensure your initial gross weight (4,256.600 gms) was adjusted or noted for stone/net gold weight if your policy tracks fine gold purity.
• Karigar Settlement Memo: Obtain a signed/acknowledged melting statement or debit note confirmation from the karigar accepting the 266.920 gms as actual melting/refining loss as per your agreed-upon ghat (tolerance/wastage) limits.

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