Gold Melting Accounting: Melt Loss, Scrap and Separation

To account for melting gold correctly, treat every melt as two separate entries: the pieces sent to the melt leave stock with their weight and fineness, the returned bar enters stock with its own weighed and assayed figures, and the gap between the two, measured in standard-fineness equivalent, is booked as melt loss. Comparing raw weights alone hides what really happened to your fine gold.

In many jewellery stores, melting happens “off the books”. A bag of broken chains and old rings goes to the refiner or melter, and a few days later a small bar comes back. If nothing precise is recorded in between, weight can quietly disappear and nobody can say why. This guide is not about buying scrap gold over the counter or about the karat conversion formula; we cover those in our articles on buying used gold and gold karat conversion. Here we focus on the melt cycle itself: preparing the lot, booking the output bar, reading melt loss over time, separating items into components, and what jewellery accounting software should record along the way.

Why does gold weight “vanish” during melting?

Melt loss is not automatically a sign of error or theft. Part of the weight is lost for technical reasons and part through recording mistakes; telling the two apart is the real job of melt accounting. General causes include:

• Non-gold material attached to the pieces: solder, dirt, stone fragments and fittings that separate out in the crucible.
• Alloy metals: some of the base metals in the alloy are lost at high temperature, which can shift the fineness of the result.
• Assay differences: the fineness estimated at the counter is not necessarily the fineness measured on the melted bar.
• Human error: a bag that was never re-weighed, a piece pulled out before melting but not recorded, or scales that were not calibrated.

No general rule defines an “acceptable” loss; it depends on the items, the melter and the method. Build your own history instead of relying on someone else’s rule of thumb.

Melting versus separating: what is the difference?

Melting turns several pieces of different weights and finenesses into one homogeneous lump or bar. Separating splits one item into parts, for example breaking a set into individual pieces or removing stones from a mount. Both are recorded the same way: the original item leaves stock with its details and each resulting item enters with its own code, weight and fineness. The practical difference is that melting usually changes fineness, while separating usually does not.

A controlled melt cycle in five stations

1. Sort the lot: pull out anything saleable, then group the rest by approximate fineness. Mixing very different karats makes the result harder to interpret.
2. Weigh and bag: weigh each group separately, write a melt number on the bag and, where possible, have a second person witness the weighing.
3. Book the outgoing lot: record the melt input, with weight and fineness per group, before the bag leaves the store.
4. Receive and assay: re-weigh the returned bar and obtain its assayed fineness.
5. Book the bar and compare: the bar enters stock under its own code, and the difference in standard equivalent between input and output is booked as melt loss.

Booking a mixed-karat melt: a worked example

Imagine (figures are hypothetical) three groups melted together. To compare fairly, each weight is converted to its 750 (18k) equivalent.

Look at the two loss figures. The bar is 0.350 g lighter, but the fine-gold loss is only 0.202 g of 750 equivalent, because part of the missing weight was alloy and the bar’s fineness came out above the weighted average of the input. Judge this melt by weight alone and it looks worse than it was. Another melt may go the other way, with fineness dropping and the true loss exceeding the weight difference. Only the standard-equivalent comparison is reliable.

How to read melt loss, and when to worry

One melt tells you very little. The data becomes useful when each melt sits next to earlier ones:

• Compare like with like: soldered jewellery and old bars do not behave the same way in the crucible.
• Track each melter separately: if you work with more than one workshop, keep a separate trend for each.
• Watch for jumps: a melt whose loss is clearly above your own history deserves a second look: re-weighing, a second assay or a review of the entries.
• Take negative loss seriously too: if the output equivalent exceeds the input, the input fineness was probably recorded too low.

Melt loss is a real cost of the business. It belongs in profit and loss, not buried inside inventory.

Melt control checklist for the shop

• Every melt has a unique number that matches on the bag and in the books.
• Each group was weighed twice before leaving, and both weights were recorded.
• Input fineness per group is recorded, even if estimated, with its source noted.
• The returned bar was booked at its assayed fineness, not an assumed one.
• Loss was calculated in standard equivalent and booked under its own heading.
• The stock card of the items sent out and the bar received agree.
• The person who weighs is not the person who approves the loss.

For segregation of duties and change tracking more broadly, see our guide to fraud control in gold shops.

Gold melting in jewellery accounting software: what Zaran records

P-Soft’s Zaran covers this cycle with specific tools, according to the product’s feature list:

• Melting and separation with exact input and output entries, available from the Pro plan and included in Elite.
• Automatic karat-to-standard conversion, plus pricing by the gram or by the mithqal, in all three plans; the 750-equivalent column above is not calculated by hand.
• Item definitions with your own coding scheme in every plan, so melted bars, broken jewellery and used gold each get their own group and code.
• Stock and stock card (kardex) plus full financial reports such as trial balance and profit and loss, from Pro; each melt leaves a trace on the item’s stock card.
• Opening stock entry from Pro, useful when you start with scrap already sitting in the safe.
• In Elite, a complete log of what each user changed, and suspicious invoices flagged automatically; if a melt entry is edited later, the change remains visible.

The Start plan covers core accounting for one store and does not include melting and separation. Managing several branches is not available yet and is marked as coming soon. The interface is Persian, dates follow the Iranian calendar, and the product is built for Iran’s gold trade. Read more on the Zaran overview.

Common mistakes when recording melting and separation

• Overwriting the weight: replacing the old weight with the bar’s weight hides the loss permanently.
• Booking after the bar returns: if the input is recorded only once the bar is back, there is no independent figure to compare against.
• Guessing the bar’s fineness: output fineness should be assayed, not set equal to the input average.
• Merging different melts: two melts in the same week are two separate records.
• Skipping separation entries: removing a stone or a part from an item must be recorded, or the stock card will not match the display case.

Frequently Asked Questions

How do you calculate melt loss on gold?

Add up the standard equivalent of everything sent to the melt and subtract the standard equivalent of the returned bar. The difference is the loss in fine-gold terms.

Why is comparing weight before and after melting not enough?

Because the bar’s fineness usually differs from the average fineness of the input. Weight can fall while fineness rises, or the reverse.

At what fineness should a melted bar be booked?

At the fineness measured by assay after melting, not the estimated fineness of the pieces before they went in.

Which Zaran plan includes melting and separation?

Pro and Elite. Karat conversion is in all three plans, and the stock card with full financial reports starts with Pro.

What level of melt loss is normal?

There is no single figure for everyone; it depends on the items and the melter. Your own recorded history of melts is the best benchmark.

To see melt input and output entries, karat conversion and the stock card on your own items, explore Zaran jewellery accounting software and request a demo.

Further reading

• How to Choose the Best Gold Accounting Software for Your Shop
• How to Calculate Gold Jewelry Price: Making Charge, Profit, VAT
• Gold Wholesale Accounting: Transfers and Weight-Based Settlement

Complete guide: gold and jewelry accounting software