ECONOMICS

Detailed explanation-1: -The cost of normal loss is considered as part of the cost of production in which it occurs. If normal loss units have any realisable scrap value, the process account is f credited by that amount. If there is no abnormal gain, then there is no necessity to maintain a separate account for normal loss.

Detailed explanation-2: -Normal losses are always valued at their scrap value – regardless of what costs were incurred in making them and regardless of the state of completion. if there is no scrap value, then the value of the normal loss is zero. Only abnormal losses are valued the same way as normal output.

Detailed explanation-3: -While ascertaining the cost for the process, zero value to be assigned to the units and cost of the normal loss units to be absorbed to the normal output produced. If any scrap value is received against the normal loss units, the amount will be reduced from the cost of the process.

Detailed explanation-4: -Normal loss = material input – expected output The scrap value reduces overall cost of the process. In process account Normal loss is measured at scrap value.

Detailed explanation-5: -Scrap value is the estimated cost that a fixed asset can be sold for after factoring in full depreciation. The asset that is disposed of is usually salvaged into multiple parts, with each part valued and sold separately.