We received query from our Accounting & Auditing readers about what would be the accounting entries for losses as a result of fraud incidence.
Generally in most of the scenarios, the losses due to fraud wil be recorded in profit & loss statement. For example, if a Firm sufferred misappropriation of cash, the subsequent accounting entries should be recorded:
Dr. Loss (Profit & Loss)
Cr. Cash
If the losses as a result of fraud incident is material, this fact (i.e. fraud incident) should be disclosed in the financial statement of the Firm. Management of the business need to evaluate the local laws & regulations on the disclosure element fraud.
