Normal loss journal entry in cost books

1)Debit Normal loss from Spoilage /waste/defective 

Credit Process /Job /contract

(normal loss charged directly to production cost )

 

2)If charged indirectly to production cost 

Debit Production overhead account

Credit stores ledger 

 

which one is correct?

 

 

 

Replies (4)
Quick Summary
This discussion clarifies the correct journal entry for normal loss in cost accounting. It explains that normal spoilage, waste, or defective items should be debited to the process, job, or contract account directly. If charged indirectly, it's debited to production overhead. The example illustrates how to handle normal spoilage as part of production cost, distinguishing it from abnormal loss.

Option 1 is correct

manufactuing cost of work order is Rs 1000,8% of the production against that the order spoiled and rejection is estimated to have a realisable value of Rs  20 only .The normal rate of spoilage is 2% ..Record this entry in cost books 

1st one is right one

Normal spoilage @ 2% is part of production cost.

Rest 6% abnormal loss is debited to P&L (net of realizable value)

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