Consignment Accounting – LOSS OF STOCK
In the course of consignment transactions some loss of stock may occur. It may be in the course of transit before or after taking delivery of the goods by the consignee or itmay occur at the godown of the consignee. Such loss of stock may be normal or abnormal. Normal Loss is due to inherent characteristics of goods, e.g., loss due to evaporation, sublimation, drying up of goods etc. If lass occurs on account of reasons which are only accidental or which rarely happen the loss is tenned as Abnormal. The examples of such losses are—theft of goods or destruction of goods by fire.
Normal loss. It is not shown in the consignment account. This is included in the value of goods sold and closing stock by inflating the rate per unit. The value of closing stock will, therefore, be that proportion of total value of goods sent which number of units in hand bear to total number of units as diminished by loss (i.e., the units actually received by the consignee). In short cost of goods sent becomes cost of goods received.