Question

Normal loss vs abnormal loss?​

Answer 1

Normal loss cannot be avoided. Abnormal Loss is avoidable o account of precautions. This loss is due to nature of the goods such as evaporation, loss of weight, drying etc. This loss arises due to external reasons like loss by theft, fire, carelessness etc.

Answer 2

Normal loss

Normal loss is the loss that occurs due to the nature of the goods consigned. Its nature is as follows:

• It occurs due to unavoidable reasons.
• It is due to natural causes such as losses due to evaporation, normal leakage, spoilage, breakdown, drying etc.
• It forms the part of cost of goods sold.
• It forms the part of cost of goods sold.It is taken into account only when unsold stock is to be valued.
• It is not shown in the consignment account.
• No entry is passed in the books regarding the normal loss.

Abnormal loss

Abnormal Losses may arise due to mishap, mischief and inefficiency. This loss is not natural and can be avoided with proper care. Its nature is as follows:

• It is unnatural and avoidable.
• It arises due to reasons like fire, riot, flood, theft, road accident etc.
• In case of abnormal loss, the value of stock is not inflated.
• It is calculated after taking into consideration the proportionate expenses incurred on it.

Hope it helps..