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Query about abnormal loss

Pooja Sadane (student) (25 Points)

20 August 2013

can anyone explain me why abnormal loss is credited 2 trading account??

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5 Replies

Ankit (CA, CS) (3064 Points)
Replied 20 August 2013

Dear Pooja,

Abnormal loss is the loss over and above the normal loss of the raw materials. Since the goods are lost, that is, they have moved out of the factory, it will be credited to the Trading A/c.

It is based on the main principal of Accounting i.e Debit What comes in and Credit What Goes Out

Also, the loss due to the said wastage, will automatically get adjusted in the trading account

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Pooja Sadane (student) (25 Points)
Replied 20 August 2013

thank you....i got it

Ashish (Chief Mentor) (40 Points)
Replied 20 August 2013

the main funda is that trading account gives us gross profit and that should not be swinged by abnormal reasons .so it is credited to trading account.

this is in conjunction with the premise that trading account shows us cost of goods sold --normal cost

CA Siddharth Mehra (Chartered Accountant) (145 Points)
Replied 21 August 2013

as per the provisions of cost accounting u can charge only normal loss from the customer i.e. from the price and cannot charge the abnormal loss from the customer.

since the abnormal loss arises from the reasons other than normal course of business, hence your will have to bear the cost of abnormal loss by debiting it to profit & loss account.

Ashish (Chief Mentor) (40 Points)
Replied 21 August 2013

I am sorry to interject but no one can stop anyone from charging abnormal or super abnormal loss to customer. Cost accounting principles least of all dissuade it. All cost accounting principle theorise that for your own purpose please calculate normal cost of production by incl only normal costs.