diff --git a/README.md b/README.md
index 3c47212..f6f69c8 100644
--- a/README.md
+++ b/README.md
@@ -35,6 +35,10 @@ This module allows for the retrospective adjustment of product costs and Cost of
 *   **Accounting Date**: **End Date** of the Readjustment Period.
 *   **Reference**: Includes POS Order and POS Session Name for easy reconciliation.
 
+### 4. Scrap / Inventory Loss Adjustment
+*   **Trigger**: Moves to a location with Usage "Inventory Loss" (e.g., Scrap/Spoil) where the move is flagged as a Scrap operation or the location is a designated Scrap Location.
+*   **Account Selection**: Prioritizes the **Location's Incoming Stock Valuation Account** as the counterpart (Expense/Loss account) if configured. This overrides the default Product Category Stock Output account, ensuring precise allocation of losses to specific accounts (e.g., "Waste & Damage Inventory").
+
 ## Usage
 
 1.  Go to **Inventory > Operations > Stock Readjustment**.
diff --git a/models/stock_readjust_valuation.py b/models/stock_readjust_valuation.py
index efe3bbf..29f405f 100644
--- a/models/stock_readjust_valuation.py
+++ b/models/stock_readjust_valuation.py
@@ -600,6 +600,11 @@ class StockReadjustValuation(models.Model):
                    debit_acc = val
                    credit_acc = stock 
               else:  
+                   # Check for Scrap / Inventory Loss
+                   if move.location_dest_id.usage == 'inventory' and (move.scrapped or move.location_dest_id.scrap_location):
+                       if move.location_dest_id.valuation_in_account_id:
+                           stock = move.location_dest_id.valuation_in_account_id.id
+
                    debit_acc = stock
                    credit_acc = val