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Question

Loss which is essential and unavoidable is called ____________.


A
abnormal loss
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B
normal loss
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C
avoidable loss
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D
insurable loss
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Solution

The correct option is C normal loss
Normal loss occur during process of production which is an unavoidable and uncontrollable loss. A certain percentage is predefined on the basis of historical records. 

Loss which is over and above the normal loss is an abnormal loss. These losses are controllable and avoidable. 

for example, input quantity is 1000 units and expected normal loss is 5%. If the out put is 925 units, abnormal loss can be calculated as:

Units introduced                               1000
Normal loss @5%                                 50
                                                          ---------

Accountancy

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