Valuation of Normal loss

Friend,

Take One Eg.

Suppose U Input 1000 Units @ 10/- - = 10000/-

U Know That It Produces 2000 Finished Units

Then The Quantity U Know Which Will Lost in Process That is Normal Loss here 8000 Units.

after production u got as u expect

i.e. 2000 finished units

after what will u do. while taking out cost to finished goods ( IF Other Expenses = 10000/-)

Then Wat U Do?

10000+10000

-------------------            =  100 PerFinished unit

2000 Units Na

Why?????

Bcoz Its Normally Happen..It Mean That Cost is Already Included in...............Getting............

if it abnormal u will not include............

& if some scrap arises from normal loss thats why u hav to deduct its scrapp value............

as normal loss is purely a part of production...

but abnormal loss is part   of Financial accounts...........

not a part of cost.........

hav u got or not....................

if not..let me know...........

Dear Nithin,

Cost of Units calssified as "Normal loss" is absorbed by "Good Units" - this is correct, that's why in Process A/c their cost is not credited.

Normal loss is expected loss therefore any expected recovery has also to be adjusted from the cost to be allocated to good units. 

Therefore in Process A/c the "expected Realizable value" of Normal Loss will be credited & reduced form the cost for the purpose of allocation..

Remember it's the "EXPECTED realizable value & not the ACTUAL realizable value, which is credited to Process A/c.