Inventory spoilage
In one sentenceInventory that is damaged, goes bad or expires so it cannot be sold or used, and is removed from inventory at its value.
Simply put
Spoilage is a fact of life in restaurants, bakeries and pharmacies: vegetables wilt and products expire. What matters is to record and measure it instead of letting it disappear into count differences.
Normal, expected spoilage in manufacturing is part of the cost of production, while abnormal spoilage is charged as an expense in the same period and not added to the cost of inventory.
Worked example
A restaurant bought vegetables worth 2,000 SAR during the month, of which 150 SAR worth spoiled.
Dr. Spoilage expense150
Cr. Inventory150
Spoilage rate150 ÷ 2,000 = 7.5%
Value of spoilage150 SAR
Formula: Spoilage rate = value spoiled ÷ value of purchases or consumption
Don't confuse it with
Inventory count varianceSpoilage is damage with a known cause, recorded when it happens, while a count difference is a shortfall whose cause may only be known after investigation.
in FullScreen ERP
Warehouses and items alerts you to items nearing expiry, so you can deal with them before they become spoilage. Warehouses and items