Question

Why is abnormal loss added in profit??

Answer 1

Answer:

Abnormal loss -- Define

Abnormal process lossThe loss realized over the normal loss is called an abnormal loss. Abnormal loss arises because of abnormal working conditions, bad working condition, carelessness, rough handling, lack of proper knowledge, low quality raw material, machine breakdown, accident etc. Therefore an abnormal loss is an unanticipated loss. Abnormal loss is a controllable loss and thus can be avoided if corrective measures are taken. Therefore, abnormal loss is also called an avoidable loss. The value of an abnormal loss is assessed on the basis of the production cost with which the profit and loss account is charged.Value of abnormal loss = (Normal cost of normal output/Normal output) X Abnormal loss qty.

Abnormal Loss

Suppose a part of goods is stolen, now this will reduce the value of stock and therefore profit on consignment. ... After finding out the value, consignment a/c is credited and abnormal a/c is debited and then transferred to profit and loss a/c, so as to arrive at correct profit or loss of consignment.

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