Normal Wastage is inevitable and is bound to occur due to nature of materials


Normal Wastage is inevitable and is bound to occur due to” nature of materials. It arises out of breakage, evaporation, deterioration, shrinkage; it cannot be avoided even if by exercising strict control over materials.

Accounting Treatment of Wastages:

Normal wastage is unavoidable and uncontrollable and is therefore, treated part of the product. Abnormal wastage is unanticipated and is valued as if the out is good. This cost is transferred to Costing Profit and Loss A/C.



Scrap is the incidental residue from certain types of manufacture, usually small amount and low value. The main feature of scrap is that it has some disposal value and it arises from normal production process. It arises for faulty operation, I of supervision, wrong process and use of defective raw materials.

Types of Scrap: There may be three types of scraps as detailed below:

(a) Normal scrap: This is considered to be inherent in the production process and hence it can be anticipated much in advance of the manufacture process.


(b) Defective scrap: This occurs due to the use of substandard quality of materials or for bad workmanship.

(c) Administrative scrap: This occurs due to the decision taken by management such as use of different methods of production.

Accounting Treatment of Scrap

Accounting treatment of scrap is made depending upon the quantity of scrap and its sale value.


(a) The income earned by such sale is taken as other income when the scrap has negligible value.

(b) The sale value can be used to reduce the cost of materials by deducting it from material cost.

(c) It can be credited to the cost of production and selling price.

(d) If the scrap arising from one job is transferred to another job as a raw material, the former job is credited with the cost of scrap and latter, is debited.


Difference between waste and scrap

(1) The degree of occurrence of waste is more when compared to the occurrence or the elements of inevitability in scrap.

(2) The scope of re-using scrap in the same production process is higher than that of waste.

(3) The saleable value of scrap is higher than that of waste. Spoilage:


Spoilage is called ‘man made scrap’. It consists of goods damaged beyond rectification in course of production process and is disposed of without further processing. Spoilage arises due to faulty operation, bad workmanship, defective raw materials and defective machines. Spoilage cost is the difference between costs accumulated to point of rejection less disposal or salvage value.

Accounting Treatment of Spoilage

(1) Loss arises due to normal spoilage can be debited to the job, product or process in which it occurs.

(2) Abnormal loss arising out of spoilage which is unexpected and un-controllable, (ii) transferred to costing profit and loss account.

(3) If it becomes difficult to identify the normal loss to any of the products or jobs or process, it is charged to factory overheads.

Difference between scrap and spoilage

(1) Genially spoilage arises towards the finishing stage with higher loss of add value, whereas scrap arises in the beginning and middle stage of production will less added value.

(2) Spoilage occurs because of some defects in the manufacturing process. But scrap occurs as a result of inherent production process.

(3) Scrap is inevitable whereas spoilage is not so in all cases. Defectives

Defectives are that portion of production which can be rectified by application of some additional material, labour or overheads. Defective occurs due to substandard materials, bad supervision, bad planning, bad design and bad working condition.

The extra cost of rectifying the defectives is included in the total cost and quantity of defective rectified is added with good units. Rectification is advisable only when the cost of rectification is low.

Accounting Treatment of Defectives

(1) Where the defective unit is identified with specific job or department, the extra cost of rectification can be charged to that department.

(2) Where the defective unit is not identified with a particular job or department, the extra cost of rectification is added to general factory overheads.

Where the defective is due to abnormal reasons the cost of such defective is charged to costing profit and loss account.

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