Silence is a reply
In a production process, the number of good units produced is usually slightly less than the input due to unavoidable normal loss. The cost of the entire input, including normal loss, is spread across the good units. Any loss beyond this expected amount is considered abnormal loss and is accounted for as if it were good units produced. This helps monitor and control such losses in the future.
How is normal loss accounted for? No journal entry is typically made for normal loss unless there is some recovery in the form of sale value. If the normal loss has sale value, a journal entry should be passed to reflect this. If it has no sale value, then no entry is needed, and simply remaining silent is the proper accounting treatment. In this sense, not making an entry is also a form of accounting, similar to how silence can be a response.
By CA L.Muralidharan and CPA L.Mukundan
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