Abnormal Spoilage
What is Abnormal Spoilage
Abnormal spoilage is spoilage that should not have happened – was not predicted – and not budgeted for.
![as1](https://seeaccountingnow.online/wp-content/uploads/2020/05/as1.jpg)
How it Works
In any manufacturing production process, there is always some form of spoilage.
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/as2.jpg)
This may be due to machinery break down or occasional employee error.
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/as3.jpg)
Typically, the cost of this spoilage is built into the cost of goods sold.
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/as4.jpg)
In other words, the cost of spoilage is spread over all the units eventually sold.
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/as5.jpg)
Abnormal spoilage is spoilage you don’t expect in the production process.
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/as6.jpg)
It results from such things such as poorly maintained machinery or repeated errors due to poorly trained staff.
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/as7.jpg)
You can’t expect to recover the cost of abnormal spoilage in the eventual sale price of the goods.
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/as8.jpg)
So you need to write the cost down.
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/as9.jpg)
How to Account for Abnormal Spoilage
To record abnormal spoilage, you take value from the asset account.
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/as10-1.jpg)
And allocate it to an expense account known as loss from abnormal spoilage.
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/as11-1.jpg)
You do this via an account known as a materials overhead account
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/as10.jpg)
This is an account used to track costs associated with purchasing, storing, handling, and delivery of raw materials.
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/as13.jpg)
In other words, the value of raw materials will be recorded in the raw materials account.
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/as12.jpg)
Then, any associated costs will be shown as offsetting entries in the materials overheads account.
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/as11.2.jpg)
To record abnormal spoilage, you credit the materials overheads account.
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/as14.jpg)
This shows you have taken value from the raw materials account.
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/as15.jpg)
At the same time, you debit the loss from abnormal spoilage account.
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/as17.jpg)
This shows you have allocated the value to loss from abnormal spoilage.
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/as18.jpg)
© R.J. Hickman 2020