Consignment Accounting – Abnormal loss

Abnormal loss. This loss should be debited to Abnormal Loss Account and credited to Consignment Account. Abnormal Loss Account may be closed by transferring to P & L Account.

The credit to the consignment account with the value of Abnormal Loss is given because it will make possible for the management to judge properly the profitability or otherwise of the consignnicnt.

The valuation of stock destroyed on account of abnormal reasons will be done on the same basis as valuation of Stock on Consignment i.e., proportionate cost price plus proportionate direct expenses incurred up to the date of loss.

While valuing abnormal loss, care should be taken of the stage where abnormal loss took place since only such expenses have to be included in the valuation oEsuch abnormal loss which have been incurred upto that stage. This will be clear with the help of the following illustration.