Departmental Accounting with practical problem

DEPARTMENTAL ACCOUNTING

1. DEPARTMENTAL ACCOUNTING D.JEBASELVI ANITHA

2. Departmental Accounting Departmenta l accounting system is best for businesses with several activities. Many goods can get manufactured when there are various branches under a single roof . Departmental accounting helps to track costs and performance.  Example: Textile sector may produce a variety of textiles like wool, cotton, and jute. With departmental accounting, the performance of each department is tracked.

3. OBJECTIVES To know the financial position of each and every department separately , it is helpful to make a comparison. Calculate commission of the managers department wise. Evaluate performance, planning, and control.

4. ADVANTAGES Growth Potential Justification of Capital Outlay Judgement of Efficiency Evaluation of Performance

5. Types of Departments Independent Departments Don’t use resources from other departments. D on’t transfer resources to other departments.  They are independent of the other departments and perform specialised tasks. Example : legal department or research department. Dependent Departments These are the departments whose activities are close and where resources get transferred. This could occur between:  Departments for production and purchasing Operations and production Sales and marketing

6. Prepare Departmental Trading Accounts Particulars Department X Department Y Opening Stock 18,000 16,000 Purchases 54,000 42,000 Sales 84,000 75,000 Closing stock 20,000 10,000 Wages 2,000 1,000

7. Departmental Trading Account Particulars X Y Particulars X Y To Opening Stock 18,000 16,000 By Sales 84,000 75,000 To Purchases 54,000 42,000 By Closing stock 20,000 10,000 To Wages 2,000 1,000 To Gross Profit 30,000 26,000 1,04,000 85,000 1,04,000 85,000

8. Calculate Opening and Closing Stock Reserve Department X transfers goods to Department Y at selling price. Y Department’s stock consists 2/3 rd of goods received from Department X and balance 1/3 rd other expenses. Gross Profit Ratio of Department X: 30% Opening Stock of Department Y : ₹1,50,000 Closing Stock of Department Y: ₹3,00,000

9. SOLUTION Calculation of Opening Stock Reserve 1,50,000 x 2/3 x 30% = ₹30,000 Calculation of Closing Stock Reserve 3,00,000 x 2/3 x 30% = ₹60,000