Decide how cost is calculated
Account for what you scrapped
Why this step
Offcut, scratched profile and broken glass have already been paid for. Posting scrap to an expense account makes waste visible as a number in the accounts rather than a quantity that quietly vanished from a shelf.
What this does
Explains where the value of scrapped material goes on this platform. The scrap workflow itself — raising and validating scrap orders — is covered in the counting-and-scrap article; this one covers the accounting: what a validated scrap does to your books today (less than most people assume), and what the Loss Account machinery would do if accounting ever switches it on.
The honest headline first: with this platform's periodic valuation, validating a scrap posts no journal entry. The stock quantity drops, the Stock report's Total Value drops with it, and accounting sees the effect at closing time — as a lower ending stock, not as a labelled scrap expense.
Before you start
- Nothing to configure for the current behaviour — scraps land in the Inventory adjustment loss location and reduce stock, full stop.
- To ever see scrap as a labelled expense line, two accounting decisions are needed: perpetual valuation on the affected categories, and a Loss Account on the scrap destination location. Neither is set anywhere on this platform today.
Steps
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01
Scrap as usual (or let production's quality dispositions raise the scrap orders — they arrive here in Draft for the warehouse to validate).
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02
Validate the scrap: quantity leaves the source location for the loss location, and the product's on-hand and value fall accordingly.
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03
Measure breakage where it is visible now: Inventory › Reporting › Moves History paints scrap references red, and its Inventory Adjustments filter isolates that traffic — or read the scrap orders themselves under Operations › Adjustments › Scrap. (Filtering by the loss location needs the multi-locations right, which few users hold.)
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04
For a money figure, do the arithmetic the system does: scrapped quantity × the product's Cost (everything here is standard-costed, so the multiplication is honest).
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05
At period end, accounting closes the stock valuation; the scrapped value is inside the period's stock variation.
The Loss Account machinery, honestly
| Element | State on this platform |
|---|---|
| Loss Account on the destination location | The field exists on every inventory-loss location's form (its help: an expense account used to re-qualify products removed from stock) — and is empty on every loss location here. |
| Journal entry on scrap | Would require Perpetual (at invoicing) valuation on the category and the Loss Account set; then validation would credit the stock account and debit the loss account immediately. With periodic valuation — this platform — nothing posts regardless. |
| The closing report's "Inventory Loss" line | The accountants' closing view can break out inventory-loss movements as their own line — but only when a loss location carries an account, so it is absent here. |
| A "scrapped value" report | Does not exist on this install. Quantity trails exist (Moves History, the scrap orders themselves); money is quantity × Cost, computed by you. |
Note
You do not need to create a scrap location for any of this. Your company ships a single inventory-loss location — Inventory adjustment — and scrap defaults to it (other companies on the platform also carry a separate Scrap location; either way the default is the company's first loss location). Adding more loss locations is an organisational choice — separating shrinkage from breakage in the move history — not an accounting requirement.
Troubleshooting
| No journal entry after validating a scrap | Expected — periodic valuation posts nothing per move. The books catch up at closing. |
|---|---|
| Scrap doesn't appear in the Profit and Loss | Same reason. Until perpetual valuation plus a Loss Account exist, scrap is not a labelled P&L line — it is part of the closing stock variation. |
| Where did the scrapped stock go? | Into the company's inventory-loss location. Seeing the quants there needs the multi-locations right (Locations report with the Internal Locations filter cleared); without it, read the scrap orders and Moves History's red-referenced rows instead. |
| Draft scrap orders keep appearing on their own | Production quality dispositions (scrap / full remake) raise them automatically for the affected serials; the warehouse validates or cancels them. |
| Can we at least see scrap trends? | Yes — Moves History with the Inventory Adjustments filter (or the red-referenced rows), grouped by product and month in the pivot. Quantities only; multiply by Cost for value. |
Common mistakes
- Setting up a Loss Account and expecting entries to start — under periodic valuation the account is inert; the valuation mode is the real switch, and it belongs to accounting.
- Quietly consuming extra material instead of scrapping. Scrap is the only trail that makes breakage measurable — the production articles make the same point from the floor's side.
- Reading the missing P&L line as lost data. The value is in the books — inside the closing stock variation — just not labelled "scrap".
- Building a scrap-cost report off delivered prices instead of Cost — stock leaves at cost, not at sales price.
Checkpoint
This month's scrap appears as a cost you can compare against last month's.