Page 25 - Cost Accounting - Ready Reckoner

22

If Expected output > Actual output, its abnormal loss.

If Expected output < Actual output, its abnormal gain.

Dr. The format of a Process A/c. Cr.
Units ₹ Units ₹
To Direct Material xxxx By normal loss xxxx
To Direct Expenses xxxx By Abnormal loss xxxx
To Overheads xxxx By transfer to next Process xxxx
or Finished goods.
To Abnormal Gain xxxx xxxx
xxxx xxxx

Cost/ Unit to find value of Abnormal loss or gain is

−
=
( )− ( )

Abnormal loss is transferred to Costing P/L A/c. In Abnormal gain A/c, the scrap
realisation lost (opportunity loss) is credited to normal loss A/c and the balance is
transferred to Costing P&L A/c.

Dr. Abnormal Gain A/c. Cr.
Units ₹ Units ₹
To Normal loss A/c xxxx By Process A/c xxxx
To Costing P&L A/c xxxx
xxxx xxxx

If there is W.I.P in manufacturing a product, statement of equivalent
production is prepared.
Equivalent Production is found for every element of cost. For sums involving
preparation of statement of equivalent production, the following steps are followed.

Step 1: Statement of equivalent production.

This statement can be prepared by 2 methods: FIFO and Weighted Average Method.