TREATMENT OF SPOILED AND DEFECTIVE WORK

Treatment of spoiled and defective work

Circumstances
Treatment
(1)    Loss due to normal reasons
When a normal rate of defectives has already been established and actual number of defectives is within the normal limit, the cost of rectification or loss will be charged to the entire output. If, on the other hand, the number of defective units substantially exceeds the normal limits, the cost of rectification or lossare written off in Costing Profit and Loss Account.
(2)    Loss due to abnormal reasons
In this case cost of rectification and loss is treated as abnormal cost and the cost of rectification or loss is written off as loss in costing Profit and Loss account.

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