Difference between normal loss abnormal loss and abnormal gain in points
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Normal Loss:
Normal loss means that loss which is inherent in the processing operations. It can be expected or anticipated in advance i.e. at the time of estimation.
The cost of normal loss is considered as part of the cost of production in which it occurs. If normal loss units have any realisable scrap value, the process account is f credited by that amount. If there is no abnormal gain, then there is no necessity to maintain a separate account for normal loss.
Abnormal Loss:
Abnormal loss means that loss which is caused by unexpected or abnormal conditions such as accident, machine breakdown, substandard material etc. From accounting point of view we can say that abnormal loss is that loss which occurred over and above normal loss. These losses are segregated from process costs and investigated to prevent their occurrence in future.
Process account is to be credited by abnormal loss account with cost of material, labour and overhead equivalent to good units and the loss due to abnormal is transferred to Costing Profit and Loss Account.
Abnormal Gain:
If the actual loss of a Process is less than that of expected loss then the difference between the two will be treated as abnormal gain
Normal loss means that loss which is inherent in the processing operations. It can be expected or anticipated in advance i.e. at the time of estimation.
The cost of normal loss is considered as part of the cost of production in which it occurs. If normal loss units have any realisable scrap value, the process account is f credited by that amount. If there is no abnormal gain, then there is no necessity to maintain a separate account for normal loss.
Abnormal Loss:
Abnormal loss means that loss which is caused by unexpected or abnormal conditions such as accident, machine breakdown, substandard material etc. From accounting point of view we can say that abnormal loss is that loss which occurred over and above normal loss. These losses are segregated from process costs and investigated to prevent their occurrence in future.
Process account is to be credited by abnormal loss account with cost of material, labour and overhead equivalent to good units and the loss due to abnormal is transferred to Costing Profit and Loss Account.
Abnormal Gain:
If the actual loss of a Process is less than that of expected loss then the difference between the two will be treated as abnormal gain
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1. Normal Loss
The loss that is expected or anticipated ahead of production is a normal process loss.
2. Abnormal Loss
The loss realized over the normal loss is called an abnormal loss. It is also referred to as an avoidable loss. Avoidable if correct measures are taken.
3. Abnormal Gain
If the anticipated loss is lesser than the actual loss, it is abnormal gain.
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