Departmental Account

Description and Contents of Course:

Departmental Accounts

Introduction of Departmental Account

Meaning of Departmental Account

Objects of Departmental Accounting

1. Determination of profit/loss of each department separately.

2. Ascertainment the financial position of each department. 

3. Making comparison of the profit/loss and financial position of each department with the last year’s position. 

4. Determination of the wages of the manager on the basis of the profits of every department.

5. Preparation of the policy of future generation. 

6. Taking care of each department.

Profit of Departmental Accounting

1. To ascertain profit-loss.

2. Helpful in increasing profit.

3. Helpful in preparation of polices of the firm.

4. To know the financial position. 

5. Helpful in work efficiency of employees.

Difference between Department and Branch

Statement Required : While preparing departmental accounts only “Trading & P/L A/c” is prepared separately for every department in separate columns. The following Trading & P/L A/c may be prepared.

Departmental Trading and P/L Account

Important Points :

1. If the given expenses is related to the sales then such expenditure should be distributed over the department in the ratio of sales. For example – Advertisement expenses, discount allowed, bad debts, salesman commission, carriage outward or any other smiler expense related to sales.

2. If any expenses ‘other than selling’ is specified in the question then such expenditure should be distributed on time Basis over the department.

3. If any expense is clearly specified for distribution purpose with specified ratio then expenses should be distributed on the basis of specified ratio.

Many and Many Practical Problems and solutions for better understanding.