## Subsidiary Accounts in Process Costing

In addition to the Process Account, three subsidiary accounts are maintained.

### Normal Loss Account

Particulars	Units	Total	Particulars	Units	Total
To Process A/c	Normal loss units	Units × SP	By Abnormal Gain A/c	Abnormal gain units	Units × SP
			By Cash A/c	Balance (units actually sold)	Units × SP

### Abnormal Loss Account

Particulars	Units	Total	Particulars	Units	Total
To Process A/c	Ab. loss units	Units × Normal Cost/Unit	By Cost Ledger A/c (Cash)	Ab. loss units	Units × SP of Normal Loss
			By Costing P/L	—	Balance figure (net loss)

### Abnormal Gain Account

Particulars	Units	Total	Particulars	Units	Total
To Normal Loss A/c	Ab. gain units	Units × SP of Normal Loss	By Process A/c	Ab. gain units	Units × Normal Cost/Unit
To Costing P/L	—	Balance figure (net gain)

### 3-Step Procedure to Close These Accounts

Step 1: Write down all entries of Normal Loss, Abnormal Loss, and Abnormal Gain made till date in the respective accounts (transfer from process account).

Step 2: Sell Normal Loss units and Abnormal Loss units at the SP of Normal Loss units (cash receipt).

Step 3: If there is Abnormal Gain, post an entry to the Normal Loss A/c at SP of Normal Loss units (because the abnormal gain reduces the scrap revenue we could have earned), and close all accounts to Costing P/L.

### Logic

Normal Loss is realised through cash (scrap sale) — no P/L impact.
Abnormal Loss is a net loss after recovering scrap value — transferred to Costing P/L.
Abnormal Gain is a net gain after adjusting for lost scrap revenue — transferred to Costing P/L.

Worked example

### Example 1

Abnormal Loss A/c Example: 200 units of abnormal loss at Normal Cost ₹40 = ₹8,000 (Dr). Sold as scrap at ₹20/unit = 200 × ₹20 = ₹4,000 (Cr). Balance ₹4,000 transferred to Costing P/L as net abnormal loss.

### Example 2

Abnormal Gain A/c Example: 150 units of abnormal gain at Normal Cost ₹40 = ₹6,000 (Cr from Process A/c). Debited 150 × ₹20 = ₹3,000 to Normal Loss A/c (lost scrap revenue). Balance ₹3,000 credited to Costing P/L as net abnormal gain.

⚠️ Common exam mistakes

Forgetting to debit the Abnormal Gain A/c with lost scrap revenue (the entry to Normal Loss A/c).
Charging the full abnormal loss to P/L without netting off scrap recovery.
Mixing up units sold with units of normal loss — only actual sale units are credited to cash.
Not closing the Normal Loss A/c after adjusting for abnormal gain — it must balance to actual cash received.

Reference:

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Subsidiary Accounts — Normal Loss, Abnormal Loss and Abnormal Gain Accounts

Worked example

⚠️ Common exam mistakes