Question

Amount of 'Abnormal Loss' (Cost Price $+$ Proportional Expenses).

• A. Shall be debited to Consignment A/c
• B. Shall be credited to Consignment A/c
• C. Shall be credited to General Profit & Loss A/c
• D. Shall be credited to Insurance Company's A/c

Answer 1

The correct option is B Shall be credited to Consignment A/c

Abnormal loss is unexpected and due to reasons beyond our control. So, the amount of abnormal loss (cost price + proportional expenses) shall be credited to the consignment account to arrive at the profit or loss as per consignment account correctly. This loss does not affect the value of the goods unlike normal loss, so it should be debited to the abnormal loss account and credited to the consignment account. The abnormal loss account is then debited to the profit and loss account to show the loss of the business as a whole while preparing final accounts.