The Detailed Rules for the Implementation of the Provisional Regulations on Value-added Tax stipulates that abnormal losses refer to losses other than normal losses during production and operation, including natural disasters, theft of goods due to poor management, mildew and deterioration, and other abnormal losses.

If an enterprise's products are not sold after the shelf life, it is not a loss caused by natural disasters or mismanagement, so it is not an abnormal loss.

In the specific implementation, many local tax authorities have made clear provisions on the tax treatment of goods that have deteriorated due to the expiration date. For example, the Notice of the State Taxation Bureau of Qinghai Province on Business Issues Related to Value-added Tax (Qing Guo Shui Han [2006]113) stipulates that the losses caused by expired scrapped goods with a shelf life shall be excluded from liability accidents. Abnormal losses that are not stipulated in the Provisional Regulations on Value-added Tax and the Detailed Rules for Implementation are allowed to be deducted from the output tax. Yunnan Province has also made similar provisions in document No.3 [1996].

Therefore, according to the above regulations, the sold or stocked drugs that the pharmaceutical company should destroy after the expiration date are different from "mildew and deterioration caused by poor management" and are not abnormal losses, so it is not necessary to transfer out the input tax.

Accounting treatment of inventory scrapping

1, if the income is obtained by directly selling the scrapped inventory scraps:

(1), debit: bank deposit, etc.

Loan: other business income

Taxes payable-VAT payable (output tax)

(2) Debit: Other business costs

Credit: Loss and overflow of pending property (value of scrapped inventory)

2, after approval for processing:

Borrow: raw materials (residual materials in storage)

Other receivables (compensation receivable from insurance company or responsible person)

Management expenses (net loss after deducting residual materials and compensation, which is the part of operating loss)

Non-operating expenses (net loss due to extraordinary losses, such as losses caused by natural disasters)

Loan: Loss and overflow of pending property.

In addition, the format should be paid attention to: it should be borrowed first and then lent, with the borrower at the top and the lender at the bottom; Creditor's bookkeeping symbol, account, and amount are all one space behind the debit, indicating that the debit is on the left and the credit is on the right.

Article 21 of Accounting Standards for Business EnterprisesNo. 1-Inventories: In case of inventory damage, the amount of disposal income after deducting book value and related taxes shall be included in the current profit and loss. The book value of inventory is the amount after deducting accumulated depreciation reserve from inventory cost.

How to deal with the tax on expired and scrapped inventory goods? According to our introduction, we can learn about the tax treatment that can be carried out when an enterprise finds that the products in its warehouse are out of date and cannot be sold, and when the enterprise products are scrapped according to the procedures. Please refer to our introduction in the above article.