Question

In: Accounting

How do you differentiate ‘Normal Process Losses’ from ‘Abnormal process Losses’. (6 marks)

How do you differentiate ‘Normal Process Losses’ from ‘Abnormal process Losses’.

Solutions

Expert Solution

During the process of transfer of raw material into the finished product, some units of raw material may get lost, bearing into a loss known as process loss

It can be - Normal process loss or Abnormal process loss

Normal process loss occurs on the pretext of such circumstances which are unavoidable.For instance- loss of goods due to shrinkage, evaporation, weight loosing etc.

Whereas

Abnormal Process loss occurs in the context of poor management policies, lack of discipline , bad working conditions, accidents, machine breakdown etc.

Other Differences-


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