Q.Distinguish between normal loss and abnormal loss on consignment, and state how each is treated in the books of the consignor.

Normal loss is a natural, unavoidable shortage that is never separately valued, while abnormal loss is caused by an identifiable, avoidable event and is always taken out of the consignment's trading result. …

A shortage found in a consignment is classed as either normal or abnormal, and the classification governs the whole accounting treatment.

Normal loss is inherent, natural and unavoidable — evaporation of a liquid, drying up of a commodity, or ordinary wastage in handling loose goods. No one is at fault, it cannot generally be insured, and it is never valued or shown as a separate figure anywhere in the accounts. Instead, the same total cost (and the same total direct expenses) originally incurred for the full quantity consigned is simply divided by the smaller, post-loss quantity when working out cost per unit for sales and for closing stock — the effect is that the cost per unit of the surviving goods rises quietly to absorb the loss. …