Where Normal and Abnormal Losses Occur Simultaneously

You had either the normal loss or the abnormal loss on the  consignment. But it is quite possible that both normal and abnormal losses occur simultaneously in connection with the same consignment the valuation of closing stock needs special attention as the normal loss is also involved. In order to calculate the value of closing stock, the following procedure will be followed:

i)     Take the total cost of goods consigned and add all the non-recurring expenses incurred  by the Consignor as well as the Consignee.

ii)     Deduct the quantity and cost of abnormal loss from the total number of goods consigned and the cost as obtained in (i) above respectively.

iii)    Deduct the quantity of normal loss from the quantity worked out in (ii) above without making any adjustment in cost.

iv)    How you will be left with the cost of goods of the good units with the Consignee. Calculate cost per unit of these units by dividing the cost (remaining after deducting the cost of abnormal loss) by the number of good units.

v)    Multiply the number of unsold units with the cost per unit obtained in (iv) above to arrive at the value of unsold stock.

Mayank Rai

Hi, My name is Mayank Rai. I found that Blogging is an easiest way to share your knowledge with everyone & learn something new from there.

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