In: Accounting
How do you differentiate ‘Normal Process Losses’ from ‘Abnormal process Losses’.
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-