Accounting Treatment

for Restaurant Spoilage

By: Geubrina Ria Andarint (1101103040011)

Imperial Kitchen has locations in Banda Aceh cities in Indonesia. The Imperial
Kitchen offers seafood flown in daily and culinary specials created by its chefs. The
restaurants feature offering over 350 selections, personalized service, and private dining
rooms. The material used by the restaurant are fish, calamary, shrimp and lobster that freshly
come from fisherman in Aceh and another Indonesia district.
The material storage in -320C ,because of the fast of expired product thecompany will
only supply based on weekly demand. The restaurant often have spoilage product it can be
normal or abnormal spoilage. The normal spoilage ussualy come from the breakdown of the
storage and abnormal spoilage come from the errorof operator for example the operator of
storage forget to turn on the storage or the temperature of the storage is too low.
The restaurant will accounted the spoilage product with discharged it from inventory,
because usually the spoilage product totally can not use anymore soit is impossible to sold it
again.

assumption
.Imperial

Kitchen, which makes food from seafood. In January 2014, Imperial Kitchen

incurs costs of $615,000 to supplies 20,500 pounds seafood. Of these 20,500 pounds, 20,000
pounds are good and 500 are spoiled units. Imperial Kitchen has no beginning inventory and
no ending inventory that month. Of the 500 ponds are spoiled, 400 units are spoiled because
of the refrigrator that use to storage is breakdown. The remaining 100 units are spoiled
because of the operator error.

Normal spoilage:
Supplies cost per unit, $615,000 / 20,500 pounds = $30
Supplies costs of good poundss alone, $30 per pound * 20,000 pounds
Normal spoilage costs, $30 per pound x 400 units
Supplies costs of good units completed (includes normal spoilage)
Supplies cost per good unit = $612,000

$600,000
12,000
$612,000

= $30.60.

20,000 units
At Imperial Kitchen, the normal spoilage rate is therefore computed as 400 / 20,000 = 2%.
The journal entry:
Materials Control (spoiled goods at current net disposal value)

$1,200

( 400 pounds * $30 per pounds )

Work-in-Process Control (specific job): 400 pounds * $30 per pound

$1,200

Abnormal spoilage:
The effect of abnormal spoilage costs, companies calculate the units of abnormal spoilage
and record the cost in the Loss from Abnormal Spoilage account, which appears as a separate
line item in the income statement. At Imperial kitchen, the loss from abnormal spoilage is
$3,000 ($30 per unit x 100 units).
Journal entries:
Loss from abnormal spoilage
Work in process

$3,000
$3,000

Solutions regarding the spoilage products

Protecting the Product
Confirmation of product quality at the time the product is received is a fundamental part of
todays fast paced inventory control process. The facility needs to be able to identify poor
quality product so that the product can be quickly replaced and arrangements made to return
or dispose of the substandard product.
Inspect and Review
A thorough receiving inspection combined with a review of transport temperature records is
the best way to prevent poor quality product. Visual inspections for damage often fail to
provide sufficient information about exposure of the product to unsafe storage conditions.
That makes continuous monitoring and recording of storage temperatures an essential part of
verifying product quality. Many trucking companies rely on miniature, solid-state
temperature recording devices to confirm whether proper storage conditions were maintained
during transport.
Temperature Alarms
Automated temperature alarm systems offer an inexpensive solution to the problem of
undetected loss of refrigeration. These systems use temperature sensors to provide instant
warning when space conditions stray from ideal. In addition to temperature alarms, state-ofthe-art temperature monitoring provides a continuous record of space temperatures. Stored
temperature data can be used as a trouble-shooting tool and to help avoid product liability
disputes by providing proof that proper storage temperatures were maintained.