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What is Meaning of Scrap | Characteristics and Treatment of Scrap

Meaning of Scrap
Meaning of Scrap

Meaning of Scrap 

Scrap is the residue of certain materials left from certain type of manufacture having small recovery value without further processing.

Examples of scrap are chippings of wood, off cuts of sheet metals, small pieces of cloth, etc. As it has recovery value, the entire cost of scrap is not a loss. Only the difference between the original cost of the scrap and its recovery value is the loss.

Characteristics of Scrap

1. It is raised from manufacturing process.

2. Scrap is always physically available.

3. It can not be used as a material for original purpose.

4. It has small recovery value.

5. No further processing is required to realize its recovery value.

Also Read – What is two Bin System | Meaning of Bin Card and Specimen

Treatment of Waste

There are two types of scrap:

(i) Normal scrap

(ii) Abnormal scrap

(i) Meaning of Normal Scrap

Also Read – What is Difference Between Waste and Scrap

Normal scrap is that portion of scrap which occurs normally due to the inherent nature of the manufacturing process or due to administrative actions, such as change in the method of production or design.

(ii) Meaning of Abnormal Scrap

Abnormal scrap refers to the scrap in excess of the normal scrap, arising from abnormal causes like bad quality of materials, defective method of working, defective machines, bad workmanship, etc.

What is Treatment of Scrap

The cost of the normal scrap is absorbed by the process or job in which the normal scrap occurs. The realizable value of the normal scrap is deducted from the material cost of the concerned process or job.

Where the scrap occurs, if the scrap can be identified with any process or job, then the realizable value of the normal scrap is deducted from the factory overhead.

The loss arising from abnormal scrap should be excluded from cost and charged to costing Profit and Loss Account.

What is Control of Scrap

Scrap can be controlled through the following measures:

1. By fixing the limit of normal scrap.

2. Through regular scrap report.

3. By remedial action (such as, use of good quality material. improvement in the manufacturing methods, use of modern machines, improved workmanship).

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