Back to Questions
SSC Financial and Cost Accounting P-1 QUESTION #9652
Question 1
In the Income Statement System for branch accounting, the treatment of a normal loss (e.g., pilferage by employees) in branch stock is:
  • Debited to Branch Account and credited to Profit & Loss
  • Charged to Abnormal Loss Account
  • No accounting entry is required; it is simply absorbed in COGS✔️
  • Debited to Insurance Claim Account
Correct Answer Explanation
Normal losses are inherent in trading operations and are automatically absorbed into the Cost of Goods Sold. No separate accounting entry is required for normal losses. Only abnormal losses require a separate accounting treatment through an Abnormal Loss Account.