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Normal loss journal entry in cost books

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shilpi

student

423 Points Posted on 13 May 2021

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.

CA. Sourav Sarkar

Chartered Accountant

16188 Points Posted on 13 May 2021

Option 1 is correct

shilpi

student

423 Points Posted on 13 May 2021

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