PROCESS LOSSES

BySavina A RebelloRoll No: 35-2011

PROCESS LOSSES

NORMAL

LOSS

ABNORMAL LOSS

ABNORMAL GAIN

Example:-The product of a company passes through three distinct processes to completion. They are known as A,B, and C

From past experience it is ascertained that loss is incurred in each process:-

Process A- 2%, Process B- 5%, Process C- 10%

In each case the percentage of loss is computed on the number of units entering the process concerned.

The loss of each process has a scrap value. The loss of Process A and B is sold at `5 per 100 units and that of Process C at `20 per 100 units.

The output of each process passes immediately to the next process. The following information is obtained

Process A Process B Process B

Materials 6000 4000 2000

Direct Labour 8000 6000 3000

Manufacturing Expenses 1000 1000 1500

20,000 units have been issued to Process A at a cost of `10,000.The output of each process has been has under:-Process A-19,500, Process B-18,800, Process C-16,000.Prepare process accounts.

PROCESS A a/c

To materials introducedTo materials consumedTo direct labourTo manufacturing expenses

20,000 10,000 6,000 8,000 1,000

Particulars ParticularsUnits Amt Units Amt

By Normal lossBy Abnormal lossBy Process B a/c

400 20

100 12719,500 24,853

20,000 25,000 20,000 25,000

Given:-Materials introduced 20,000 units @ `10,000Normal loss @ 2%, output is 19,500 unitsThe loss of Process A is sold at `5 per 100 unit Materials consumed `6,000, Labour `8,000, Manufacturing exps `1,000

PROCESS B a/c

Particulars ParticularsUnits Amt Units Amt

To Process A a/c 19,500 24,853To Materials 4,000 To Direct labour 6,000To Manufacturing exp 1,000To Abnormal Gain 275 532

By Normal loss 975 49By Process C a/c 18,800 36,336

19,775 36,385 19,775 36,385

Given:-Normal loss @ 5%, output is 18,800 unitsThe loss of Process B is sold at `5 per 100 unitMaterials consumed `4,000, Labour `6,000, Manufacturing exps `1,000

PROCESS C a/c

Particulars ParticularsUnits Amt Units Amt

To Process B a/c 18,800 36,336To Materials 2,000 To Direct labour 3,000To Manufacturing exp 1,500

By Normal loss 1,880 376 By Abnormal loss 920 2,309By Process C a/c 16,000 40,151

18,800 42,836 18,800 42,836

Given:-Normal loss @ 10%, output is 16,000 unitsThe loss of Process C at `20 per 100 units.Materials consumed `2,000, Labour `3,000, Manufacturing exps `1,500

Normal loss a/c

Particulars ParticularsUnits Amt Units AmtTo Process A a/c 400 20 To Process B a/c 975 49To Process C a/c 1,880 376

By Cash a/c Process A 400 20 Process B 700 35 Process C 1,880 376 By Abnormal gain 275 14

3,255 445 3,255 445

ABNORMAL LOSS a/c

Particulars ParticularsUnits Amt Units AmtTo Process A a/c 100 127 To Process B a/c 920 2309

By Cash a/c Process A 100 5 Process B 920 184By Profit & Loss a/c 2,247

1,020 2,436 1,020 2,436

Particulars ParticularsUnits Amt Units Amt

To Normal Loss 275 14 To Profit & Loss a/c 518

By Process B a/c 275 532

275 532 275 532

ABNORMAL GAIN a/c

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