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Abnormal loss??????

IPCC 686 views 1 replies

Guest

Can anyone explain me why abnormal losses are credited to Trading a/c??? For e.g when goods worth Rs 200000 are consigned and are lost in transit and insurance Co. pays 40%, so in this case entry is:

Bank A/c Dr. 80000

loss due to accident Dr. 120000

To trading A/c 200000

So kindly explain why its going to trading a/c inspite of the fact whengoods are consigned entry made is

Goods sent on consgnmt Dr.

To Trading A/c....

Thanks in Advance

Replies (1)

S.K.Agarwal

Novice

72 Points Posted on 19 March 2010

You should read consignment accounts again. When goods are consigned entry is consignment A/c debited Goods sent on consignment A/c credited. The Goods sent on consignment A/c is shown in tradingA/c as subtraction from purchase. Now when goods lost in transit, a new account Goods lost in transit opened and value of goods lost debited to it and consignment account credited. On receiving of claim from insurance company Goods lost in transit credited with the amount received and balance left in this account i.e. Abnormal Loss transfered to Profit and Loss account i hope it is clear to you.