Natural loss norm: what is the difference between a shortage within the norm and above it?
It is natural for rice to dry out and sugar to spill, losing a little. But when is this loss charged to expenses as "within the norm", and when is it claimed from the person at fault as a shortage? The rules and a rice warehouse example.
Products such as grain, rice and sugar can dry out, spill or turn to dust during storage. Part of this loss is considered natural, and its limit is called the natural loss norm. A shortage within the norm and one above it take completely different paths in the accounts.
Key rules
- The norm applies only to an actual shortage. If the count did not reveal a shortage, nothing can be written off "in advance" under the norm (NAS No. 19, paragraph 69)
- Regrading first, then the norm. Losses within the norm are determined after surpluses from regrading are taken into account. If a shortage still remains after that, the norm is applied only to the items where the shortage arose (paragraph 69)
- Losses within the norm are written off to production costs and period expenses by order of the head (paragraph 69). The proposal for this is drawn up by the working commission (paragraph 10)
- If there is no approved norm, the loss is treated entirely as a shortage (paragraph 69)
- Shortage above the norm: if a specific person is at fault, it is charged to them (Dt 4730 or, under a claim, 4860, Ct 5910); if no one at fault is identified, Dt 9430 – Ct 5910 (NAS No. 21, paragraph 247, paragraph 249 lines 3 and 4). In this case NAS No. 19 refers to the Regulation approved by Cabinet of Ministers Resolution No. 54 of 5 February 1999 and requires the documents to state the measures taken to prevent such a shortage (paragraph 69)
- Recording: the shortage is written off at carrying amount (NAS No. 4, paragraph 91) and recorded in the general manner with Dt 5910 – Ct 1010–2990 (NAS No. 21, paragraph 249, line 1). The model tables of the chart of accounts do not give a separate line for charging losses within the norm to expenses, so it is advisable to state clearly in the accounting policy which expense account is used
- In the annual statement the results appear in separate columns: the amounts offset against regrading, written off within the norm, charged to the persons at fault, and above the norm charged to expenses (the form of the statement of results in the annex to NAS No. 19)
Example: the "Toza Guruch" warehouse
The figures and the norm are hypothetical, not an actual norm. The records show 20 000 kg of rice, and the count found 19 880 kg: a shortage of 120 kg. There is no regrading. Under the norm approved for the company, the permitted loss for this period is 50 kg. The carrying amount is 14 000 soum/kg.
| Part | Calculation | Amount, soum | Where it goes |
|---|---|---|---|
| Whole shortage | 120 × 14 000 | 1 680 000 | Dt 5910 – Ct 1010 |
| Within the norm | 50 × 14 000 | 700 000 | To expenses by order of the head |
| Above the norm | 70 × 14 000 | 980 000 | If someone is at fault Dt 4730 – Ct 5910, if no one is at fault Dt 9430 – Ct 5910 |
Check: 700 000 + 980 000 = 1 680 000 soum. If the warehouse had had no approved norm at all, the whole 1 680 000 soum would have been treated as a shortage.
Test yourself
5 questions on this topic: pick an option or reveal the answer.
Irreparable (uncorrectable) defective products were identified in the main workshop of "Chinni ustoz". How are the losses from them written off from the primary production account?
An inventory count was carried out in the warehouse of "Chirchiq mashinasozlik", and a surplus of domestic equipment requiring installation, not shown in the records, was found. What journal entry is made under NAS No. 21?
As a result of a mudflow, 80 bags of cement in the warehouse of "Tog'li qurilish" (account 1050 "Construction materials", 62 500 soum each) became completely unusable and were lost. What journal entry is made under NAS No. 21?
An inventory count revealed a shortage of goods, but it is impossible to identify the guilty person. According to the table in para. 412, with which entry is the shortage taken to loss?
Tax overpaid to the budget by "Yakkabog' tikuv" LLC was refunded from the budget to the company's settlement account. Under NAS No. 21, what journal entry is made?
Answered: 0 / 50 of 5 correct
All tests →See also
Sources
- NAS No. 19 "Organization and Conduct of Inventory Counts", paragraph 69 · losses within the norm are charged to production costs and period expenses by order of the head; norms only when a shortage is actually found; after surpluses from regrading are taken into account and only for the items with a shortage; a shortage if there is no approved norm; a shortage above the norm with no person at fault identified in accordance with the Regulation approved by Cabinet of Ministers Resolution No. 54 of 5 February 1999; measures taken stated in the documents
- NAS No. 19, paragraph 10 · the working commission draws up proposals for writing off shortages within natural loss norms
- NAS No. 19, form of the statement of results identified in the inventory count (annex) · separate columns: offset against regrading; written off within the loss norm; charged to the persons at fault; amount above the norm charged to production costs and period expenses
- NAS No. 4 "Inventories", paragraph 91 · shortage at carrying amount; in cases established by law within natural loss norms, and also where there is no person at fault or recovery is impossible, to the financial results of the period in which the decision was made
- NAS No. 21 "Chart of Accounts", paragraph 247 and paragraph 249 (lines 1, 3, 4) · shortage above natural loss norms: if the person at fault is identified 4860, 4730 / 5910; if not identified 9430 / 5910; 5910 / 1010–2990
- Example and norm · compiled by the author, hypothetical figures; not an actual norm