A MUST KNOW FOR STUDENTS

It is posted on Credit side to nullify the effect of purchases recorded as they cannot be sold in the open market at a normal selling price. if these were sold at normal selling price then it would have earned the same rate of GP as other sales earn.

those goods are salvage & you need to show that stock though it may not yield the same market price (sales price). & when you show loss on profit & loss debit side & insurance claim in the asset side of balance sheet , the balancing amt shud be at the credit side only.

Goods destroyed by fire,abnormal loss on consignment are items  credited to Trading a/c and debited back to P&l A/c:since the loss is abnormal i.e.not occured in other firms in the same industry.so if trading a/c i sdebited  directly for the loss then the Gross profit ratio will get effected ;i.e.it cannot be compared with GP Ratios of other firms.So it is necessary to credit trading a/c and debit the P&L A/c for the loss so that the Gp ratio remains as if loss had not occured.

Basically trading account is prepared to show how much profit / loss is made by the firm from trading of goods. So if goods purchased are lost due to fire this loss is not due to trading of goods and hence it is not charged to trading account. This loss is shown in P&L A/c. Same is the case with Consignment A/c where consignment account is prepared to shown profit / loss occured by consigning the goods. Correct me if i am wrong.

As far as my knowledge is concern every CA student already know the answer of this quection........

why create so much fuss for this question... As though this is the first question  that s going to  this november exam..

also the title for this topic  is so misleading.. I thought it would be some good info..  waste of time..

 why create so much fuss for this question... As though this is the first question  that s going to  this november exam..

also the title for this topic  is so misleading.. I thought it would be some good info..  waste of time..

 

VERY BASIC LEVEL OF ACCOUNTANCY...........

 To show the actual qty of stock (in other words it is shown as sales with lesser value) and the loss on such fire stock is trf to P&L (dr) to acknowledge the loss and any scrap value if realised is treated as an abnormal income. Please dont post such stupid topics and not atleast With such titles. Remember we are CA's not MBA's that we go after presentation.

dear sir it may be good question but here is chartered who are expert in accountancy

soluation

because we are included this amount in purchase figure at dr side and because this goods can not be sold so it would be shown in cr side of trading a/c so Effect Nulify

 now if there are no salvage value it will be booked a loss in p & L

i should not give answer because it q is only for students but level Of question...............................

If any query please ask