Abnormal Loss Law and Legal Definition

An abnormal loss refers to a situation where a business or firm is making profits below the normal limits. In an abnormal loss situation the total revenue of a business does not cover total cost incurred for the business. If abnormal losses persist in a firm or business, it will threaten the property of the firm or the business.

Generally, an abnormal loss occurs because of negligence, carelessness, theft, mischief, fraud of employees, or inefficiency. Some of the examples of abnormal loss are destruction of goods by fire, theft, breakage, or loss of goods because of mishandling.