Accounting entries for the scrapping of inventory goods is a relatively complex issue that involves the handling of multiple steps and ledger accounts. Below I will explain the process in detail.
First of all, when a business finds that an item in stock is scrapped, it needs to record the number of scrapped items and deduct it from the inventory. This step can be done with the following accounting entries:
Borrow: Loss or overflow of property to be disposed of.
Credit: Inventory of goods.
Next, companies need to find out why inventory items are being scrapped. If the scrap is due to normal wear and tear or expiration, for example, these losses can be processed in the Administrative Expense account. If it is due to abnormal causes such as fire, theft, etc., these losses need to be processed in the "Non-operating expenses" account. This step can be done with the following accounting entries:
Borrow: administrative expenses and non-operating expenses.
Credit: Pending property loss and overflow.
If the scrapped inventory goods can be partially valued, such as scrap metal, scrap paper, etc., the company can include these values in the "other business income" account. This step can be done with the following accounting entries:
Borrow: bank deposit cash.
Credit: Other business income.
Finally, the company needs to clean up the scrapped inventory and include the expenses incurred in the cleanup process into the "non-operating expenses" account. This step can be done with the following accounting entries:
Borrow: Non-operating expenses.
Credit: Bank Deposit Cash.
To sum up, the accounting entries for the scrapping of inventory commodities include the steps of recording the quantity of scrapped goods, identifying the reason for scrapping, the partial value, and cleaning up the scrap. Through the above entries, enterprises can accurately record and deal with the scrapping of inventory commodities to ensure the accuracy and reliability of financial statements.
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