Losses - What are Losses?
Definition: Losses are unrecoverable and unanticipated, they are a one-time removal or decrease in a resource or asset.
In accounting, losses occur in any of the following situations:
- costs that produce no benefit
- decrease in value of resources
- excess of expenditure over income
- excess of cost over net proceeds from a transaction
- contingent losses as a result of lawsuit or unexpected events
Recording losses in Financial Statements
Losses that result from events that are not related to the primary operations of a business are recorded in the profit and loss statement.
Losses that do result from events that are directly related to the operations of the business are recognized in the balance sheet.