Financial Statement Research Paper Example | Topics and Well Written Essays - 500 words

Financial Statement - Research Paper Example 2. Damaged Goods: if the organization has damaged goods, these goods will be evaluated and scrap should be sold to recover some amount and contacted to the insurance company for insurance recovery and write off the loss from the damages. 3. Stolen Inventory: if the organization faces loss from stolen inventory it should be reported for recovery but if after a period unable to found stolen goods it should be treated as loss. Explanation Losses may be normal or abnormal faced by the organization and there is different accounting treatment for each type of loss. If a company is having normal cost then it will have no special treatment it will only increase the production cost and normal loss is unavoidable and inherent which is valued with the closing stock. If the inventory is decreased by sales it will be treated as an expense in the form of a reduction in inventory (Smith and Butters, 1949). But if abnormal loss is faced by the company it will be valued and Debit to the abnormal loss account and credit to process account. These kinds of losses may arise from accidents and carelessness. For recording of this loss another account will be created in the chart of accounts and it will be debited and after that it will be write-off as an expense in the income statement.