Preparation of Process Costing with Normal and Abnormal Loss
Process costing involves calculating the cost of production for each unit of output in a continuous production process. When there are normal and abnormal losses in the production process, it is important to account for these losses accurately to determine the cost of production.

Normal Loss
- Normal loss refers to the unavoidable loss of materials or products that occurs during the production process.
- The cost of normal loss is spread over the units that are completed and transferred out of the process.
- To account for normal loss, the cost of production is calculated by dividing the total cost of production by the total units produced, including the normal loss.

Abnormal Loss
- Abnormal loss refers to the unexpected loss of materials or products that is not accounted for in the normal production process.
- The cost of abnormal loss is treated as a separate cost and is not included in the cost of production for the units that are completed and transferred out of the process.
- The cost of abnormal loss is usually charged to the cost of production for the period in which the loss occurred.

Calculating Cost of Production
- To calculate the cost of production with normal and abnormal losses, the total cost of production is divided by the total units produced, including normal loss.
- The cost of abnormal loss is treated as a separate cost and is not included in the cost of production calculation.
- The cost per unit is then calculated by dividing the total cost of production by the total units produced, excluding abnormal loss.
In conclusion, when preparing process costing with normal and abnormal losses, it is important to accurately account for these losses to determine the true cost of production. Normal losses are spread over the completed units, while abnormal losses are treated as separate costs.