The below mentioned article provides a note on waste.
Meaning of Waste:
Waste is a material loss during production or storage due to evaporation, chemical reaction, unrecoverable residue, shrinkage etc., wastage may be visible or invisible wastage. Wastage may be normal waste incidental to manufacturing activities or abnormal waste which is in excess of material loss over the normal losses. Necessary steps should be taken to minimize abnormal wastage.
Accounting of Waste:
For accounting purpose, waste may be classified into:
(a) Normal wastage and,
(b) Abnormal wastage.
(a) Normal Wastage:
Normal wastage being a normal feature and arising in a process or operation usually through standard set for the normal percentage of visible and invisible wastes that may be anticipated to arise in various manufacturing processes or operations. Therefore, normal wastage should be regarded as part of the production cost. The good units in the process should absorb the cost of waste.
(b) Abnormal Wastage:
It is in excess of the standard percentage of wastage set up to account for the normal wastage. The cost of abnormal waste should be excluded from the total cost and charged to Costing Profit and Loss Account.
If any value is realized from the waste, the Process Account concerned may be credited.
Control of Waste:
Control on waste can be achieved in the following aspects:
It involves maintenance of detailed records of quantities with an object to detect shrinkage, breakage, loss etc. Establishments of output ratios are much helpful in control of waste. Normal allowances of waste can be fixed with technical assessment and past experience, special features of material and process etc.
An organization should establish a systematic procedure for feedback of achievements against standards laid down for wastage. The causes of abnormal wastage should be studied in detail and responsibility should be fixed for wastages. Better material handling systems will also help in control of waste.
Wastage may also arise from loss of control on process or poor quality of material. The management should fix responsibilities on purchase, stores, production and maintenance departments to ensure achievement of standards.