Treatment of spoiled and
defective work
Circumstances
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Treatment
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(1) Loss due to normal reasons
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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.
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(2) Loss due to abnormal reasons
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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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