CMA Intermediate · Financial Accounting · Consignment
Which statement about abnormal loss on consigned goods is correct?
Abnormal loss is credited to the Consignment Account at cost up to the point of loss and debited to an Abnormal Loss Account. Any insurance claim admitted is set off against it, and the remaining net loss is transferred to the Profit and Loss Account.
- AIt is added to the cost of the remaining stock
- BIt is credited to the Consignment Account and debited to the Abnormal Loss Account, with any insurance claim receivable adjusted before the balance is transferred to Profit and LossCorrect
- CIt is debited to the Consignment Account as an additional expense
- DIt is shown only as a note and no entry is passed
Explanation
Abnormal loss is not a normal cost of the consignment, so it is removed from the Consignment Account by crediting it and debiting Abnormal Loss Account. Insurance claim admitted is recorded against it, and the net loss goes to Profit and Loss.
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