# Normal Loss vs Abnormal Loss
Losses of material during production are classified into two categories based on their cause. The treatment in cost accounting is very different.
## Definitions
| Normal Loss | Abnormal Loss |
|---|---|
| Loss incurred as a normal part of the production process (evaporation, shrinkage, expected wastage). | Loss incurred due to abnormal reasons — flood, fire, theft, accidents, negligence. |
| Unavoidable | Avoidable |
## Accounting Treatment
### Normal Loss
- Entire loss is absorbed by the remaining good units.
- Number of good units falls, but total cost stays the same.
- Effect: Cost per unit increases.
- No transfer to P&L.
### Abnormal Loss
- Both units lost AND the cost of those units are removed from production.
- The cost of abnormal loss is transferred to Costing P&L.
- Effect: Cost per unit stays the same as the original cost per unit.
## Comparative Illustration
Input: 5,000 units produced, Total cost = ₹1,00,000 → Normal cost/unit = ₹20
### Case A — Normal Loss of 200 units
| Particulars | Units | Cost/Unit (₹) | Total Cost (₹) |
|---|---|---|---|
| Production | 5,000 | 20.00 | 1,00,000 |
| Less: Normal loss | (200) | — | — |
| Good output | 4,800 | 20.833 | 1,00,000 |
Note: Total cost is unchanged at ₹1,00,000, but cost per unit rises from ₹20 to ₹20.833.
### Case B — Abnormal Loss of 200 units
| Particulars | Units | Cost/Unit (₹) | Total Cost (₹) |
|---|---|---|---|
| Production | 5,000 | 20 | 1,00,000 |
| Less: Abnormal loss | (200) | (20) | (4,000) |
| Good output | 4,800 | 20 | 96,000 |
Note: ₹4,000 is debited to Costing P&L. Cost per unit remains ₹20.
## Why the Difference?
Normal loss is inherent in the process — it is a cost the good units must bear. Abnormal loss is not the fault of the process — it should not distort the true cost of production.