CMA Intermediate · Cost Accounting · Process Costing
Which statement about abnormal gain in a process account is correct?
Abnormal gain is debited to the process account, because extra good units were produced beyond expectation, and credited to an Abnormal Gain account. The units are valued at normal cost per unit. The balance of the Abnormal Gain account is later transferred to the Costing Profit and Loss Account.
- AIt is debited to the process account and credited to the Abnormal Gain accountCorrect
- BIt is credited to the process account and debited to the Abnormal Gain account
- CIt is added to the cost of normal loss
- DIt is carried forward as closing work-in-progress
Explanation
Abnormal gain means actual loss is less than normal loss. The process account is debited with the extra units at normal cost, and the Abnormal Gain account is credited. The balance in that account, after adjusting the lost scrap income, goes to Costing Profit and Loss Account.
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