Applied cost accounting techniques (losses);
One of the important issues in the cost price, called the analysis of waste, waste or waste, usually arises during production based on a series of inappropriate items or waste in production operations. The other type is raw materials that cannot enter the production cycle due to external factors and will not become the main product.
The price value of such waste is very low or zero, and for this reason, no cost is allocated to it. Sawdust or non-standard cut wood in a wood products manufacturing plant are examples of waste.
Now, if the waste has a sales value, it is recorded and analyzed in one of the following two ways
The first case: if the surplus is related to a specific order:
In this case, the amount obtained from the sale of waste is considered as the recovery of a part of the cost of the order and is assigned to the creditor of the relevant order account, and the following registration is made in the books:
Cash / Accounts Receivable (Debtor)… Goods in progress (Special Order) Creditor….
The second case: if the waste is not related to a specific order
In this case, it is done in one of the following two ways:
The amount obtained from the sale of waste is considered as the recovery of part of the construction overhead costs of the relevant period and is assigned to the creditor of the construction overhead control account, and the following registration is made in the books:
Cash / Accounts Receivable (Debtor) ……… Construction Overhead Control (Creditor) ……
The amount obtained from the sale of waste is considered as other operational income and the following registration is made in the books:
Cash / accounts receivable (debtor) …….income from the sale of waste (creditor) ……
In cases where the sale value of waste such as scrap iron is significant and the time interval between creation and sale of waste is long, a conservative estimate of the net recoverable value of waste can be made and identified as inventory and in Reported financial statements. In this case, at the time of creation of waste in the account under the title (waste inventory) debtor and one of the accounts of the goods in progress, the construction overhead control and the income resulting from the identification of waste according to the type of item is credited, and any difference is credited to the profit and loss account. The term is meant.
Another thing to keep in mind is that sometimes waste materials are reused as direct materials. In such a case, the net recoverable value and residuals are estimated and the debit of the material control account and the credit of the work in progress account or the control of the construction overhead are referred to as the case may be. When Majd consumes said materials, the goods in process account is debited and the material control account is debited.
Mehdi Koh Soltani (financial services, accounting, financial and tax consultant):
Group of accountants, auditors, Tabriz
@Hesabdaran_Tabriz
@Hesabdaran_Tabrizz