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DEPARTMENT ACCOUNT


For The enterprise which has branches about four, five and so on, we need to know the
Profit obtained in each branch or department.
This will be obtained in each branch or department; this will be obtained by opening
Trading, Profit, and loss A/C for each year ended.
Example of department is chain or departmental store etc.
Every department carries on the business by buying and selling different commodities with
The aim of making profit.
Example:-
Ubungo Islamic school have two department in their store such as stationary depart and
Clothes depart.
Stationary Clothes
Stock of goods Jan 20,000 15,000
Purchases 110,000 30,000
Stock of goods Dec 30,000 25,000
Salary 180,000 90,000
Expenses were as follows:-
Rent and Rates: Stationary dept – 1,750
Clothes dept – 1,750
Administration expenses = Stationary dept – 3,000
Clothes dept – 1,800
Heat and lighting: =Stationary dept – 1,500
Clothes dept – 500
General expenses: = Stationary dept – 1,000
Clothes dept – 200
Required: – Show Department (Trading, Profit & loss A/C)
Solution:-
DR. DEPARTMENTAL TRADING, PROFIT & LOSS A/C FOR THE YEAR ENDED CR
EcoleBooks | BOOK KEEPING O LEVEL(FORM FOUR) NOTES - DEPARTMENT ACCOUNT
ALLOCATION OF EXPENSES OF DEPARTMENTS.
Departmental expenses can be divided in the following:-
(1)Equally:-
This included the expenses such as salary for a manager, General expenses, All expenses which benefits all department, Advertising.
(2) In the ration of Sales (Turnover):-
This includes expenses such as Advertisement, carriage out words, commission on sales, discount allowed, Bad depts., Return in ward etc.
(3) In the ration of Purchases:-
This includes expenses such as carriage in wards, Discount received, Return out wards, purchasing tax, warehousing, wages etc
(4) Floor space occupied (Area)
It consists of expenses like Rent and Rates lights and heating, Insurance for building, Repairs, Premises, insurances. All expenses related to maintenance of premises.
(5) In the ration of number of employee:-
E.g. Staff salary, staff welfare, staff canteen, expenses.
(6) Director apportioned to Department:-
Includes depreciation on equipment used by one department and in no way benefit other department.
Expenses to any departments or incurred specifically for that department should be charged to that department.
Example:
Ahmed runs his business in three department books, stationary and clothes. The
Following information was extracted from his books:-
Capital 250,000/=
Purchases: Books 90,000/=
Stationary 120,000/=
Clothes 210,000/=
Sales during year: Books 150,000/=
Stationary 250,000/=
Clothes 350,000/=
Stock Jan 2003: Books dept 10,890/=
Stationary dept 11,220/=
Clothes dept 25,000/=
Stock Dec. 31 2003: Books dept 11,210/=
Stationary 13,100/=
Clothes dept 28,300/=
Wages and salaries 13,800/=
Rent and Rates 10,800/=
Staff welfare 8,400/=
Light and heating 7,500/=
Advertising 4,500/=
Carriage in wards 28,000/=
Carriage out wards 1,800/=
The following information about department as available:-
Books Stationary Clothes
Floor area occupied 320 400 480
12 18 20
Required:
(a) Apportionate expenses according to suitable basis.
(b) Draw up department Trading , profit and loss A/c
WORKING:-
Expenses: (1) Wages and salaries (13,800)
(No of employee)
12: 18: 20 =
6 8 19 = 25
B: 6/25 x 13,800 = 3,312
S: 9/25 x 13,800 = 4,965
C: 10/25 x 13,800 = 5,520
2) Rents and Rates (10,800)
(Area occupied)
320 : 400 : 480
4 5 6 = 15
B: 4/15 x 10,800 = 2,880
S: 5/15 x 10,800 = 3,600
C: 6/15 x 10,800 – 4,320
3) Staff welfare (8400)
(No. of employee)
B: 6/25 x 8,400 = 2,016
S: 9/25 x 8,400 = 3,024
C: 10/25 x 8,400 = 3,360
4) Light and heating (7,500)
(Area occupied)
B: 4/25 x 7,500 = 2,000
S: 5/15 x 7,500 = 2,500
C: 6/15 x 7,500 = 3,000
5) Advertising (4,500)
(Equally)
B: 1/3 x 4,500 = 1,500
S: 1/3 x 4,500 = 1,500
C: 1/3 x 4,500 = 1,500
6) Carriage inwards (28,000)
(Ratio of purchases)
90,000: 120,000 : 210,000
3 4 7
B: 3/14 x 28,000 = 6,000
S: 4/14 x 28,000 = 8,000
C: 7/14 x 28,000 = 14,000
Carriage outwards (1,800)
(Ratio of sales)
150,000: 250,000 : 350,000
3 5 7
B: 3/15 x 1,800 = 360
S: 5/15 x 1,800 = 600
C: 7/15 x 1,800 = 840

DR DEPARTMENTAL TRADING, PROFIT & LOSS A/C CR
EcoleBooks | BOOK KEEPING O LEVEL(FORM FOUR) NOTES - DEPARTMENT ACCOUNT
DEPARTMENTAL BALANCE SHEET AS AT
EcoleBooks | BOOK KEEPING O LEVEL(FORM FOUR) NOTES - DEPARTMENT ACCOUNT
ENTER DEPARTMENT TRANSFER
Purchases made for one departmental may be sold in another departmental. In such a case, the item should be deducted from the figure for purchases of original purchasing department and added to the figure for purchases for the subsequent selling department.
EXERCISE
The following information was extracted from a trader who maintains a department store with Department A and B:-
Dept A Dept B
Purchases 52,800 43,600
Sales 160,000 124,000
Opening stock 14,600 11,240
Closing Stock 12,400 8,654
Other income:-
Discount Received 1,446
Commission Received 2,880
Expenses:-
Delivery expenses 1,800
Insurance 2,816
Adve
rtising 1,296
Additional information:-
-Advertising expenses to be apportioned equally
-Delivery to be appointed on sales
-Insurance to be appointed to the proportion 6.5 respective
Other income to be apportioned as:-
-Commission received should be proportion to 1.5% purchases Tshs. 1400 made by Department A was sold in departmental B.
Show:-
Department Trading, Profit and Loss A/C in column form for the year ended 31 Dec. 2009,
Show all you’re working.
Working:-
– Advertising 1296
Dept A: ½ x 1296 = 648
Dept B: ½ x 1296 = 648
– Delivery expenses 1800
Sales = 160,000 x 1800 = 184,000
Dept A: 160,000 x 1800 = 1014
284,000
Dept. B: 124,000 x 1800 = 786
284,000
– Insurance – 2816
6:5 (6 + 5) = 1536
Dept A: 6/11 x 2816 = 1536
Dept B: 5/11 x 2816 = 1280
– Commission received 2880
Sales: A, 160,000 B, 124,000
Dept A: 20/100 x 160,000 = 32,000
Dept. B: 20/100 x 124,000 = 24800
320 x 248 = 568
Dept. A: 320/568 x 2880 = 1623
Dept. B: 248/568 x 2880 = 1257
– Discount received 1446
Purchases: A, 52800 B, 43600
Dept. A: 3/200 x 52800 = 792
Dept. B: 3/200 x 43600 = 654
792 + 654 = 1446
A: 792/1446 x 1446 = 792
B: 654/1446 x 1446 = 654
– Department A: Purchases – 52,800
(-) Goods transfer – 1,400
51,400
– Department B: Purchases 43,600
(+) Goods transfer 1,400
45,000
DR. DEPARTMENTAL TRADING, PROFIT A/C FOR END CR
EcoleBooks | BOOK KEEPING O LEVEL(FORM FOUR) NOTES - DEPARTMENT ACCOUNT
EXERCISE 1
Kelvin department store has three department which are electrical furniture and leisure goods from the details given below you are required to draw up the trading account of the firm for the year ended 31st Dec 2001 for each department and in total
01/01/2001 31/12/2001
a) Stock
Electrical 72,960/= 95,040/=
Furniture 207,576/= 193,800/=
Leisure 172,440/= 268,740/=
b) Sales of the year
Electrical 358,080/=
Furniture 876,720
Leisure 565200/=
c) Purchases of the year
Electrical 218,340/=
Furniture 655,584/=
Leisure
328,656/=
d) Other expenses
Transport …………………………………………………………………….120,000/=
Other trading expense ……………………………………………45,000/=
e) Other expenses are to be distributed to other department on the basis of sales




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EcoleBooks | BOOK KEEPING O LEVEL(FORM FOUR) NOTES - DEPARTMENT ACCOUNT

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