Accounting treatment for fraud- losses

We received question from our Accounting & Auditing readers on what would be the accounting entries for losses arising from fraud incidence.

In most of the circumstances, the losses arising from fraud wil be recorded in profit & loss statement. For instance, if a Company sufferred misappropriation of cash, the following accounting entries should be recorded:

Dr. Loss (Profit & Loss)
Cr. Cash

If the losses arising from fraud incident is material, this fact (i.e. fraud incident) need to be disclosed in the financial statement of the Company. Management of the Company need to consider the local laws & regulations on the disclosure requirement of fraud.