Question

Which of the following accounts is used to account for cost of abnormal spoilage?

a.A cost of goods sold account
b.A spoiled goods account
c.A spoilage loss account
d.A profit and loss account

Answer 1

The cost of abnormal spoilage is accounted for in a spoilage loss account, highlighting the expense as an extraordinary and non-operational cost, separate from the typical cost of goods sold.

Step-by-step explanation:

The account that is used to account for the cost of abnormal spoilage is c. A spoilage loss account. Abnormal spoilage refers to wastage that is not considered a part of the normal manufacturing process and is beyond the typical level of spoilage that occurs during production. When abnormal spoilage occurs, it is recorded as a loss in the accounting records for a business. The costs associated with abnormal spoilage are not included in the cost of goods sold because they are not typical or expected costs of production. Instead, these costs are charged to a separate spoilage loss account, which highlights the expense as extraordinary and non-operational. This accounting treatment helps to highlight issues within the production process that may need to be addressed.