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WEEK 6
DEPARTMENTAL ACCOUNT
Content:
- Introduction to department account: meaning, needs, basis of apportionment
- Preparation of Departmental account and inter-departmental transfer
These are accounts relating to the departments or division of a business which desire to have a separate result of each department to ascertain the strength or weakness of individual departments.
ADVANTAGES OF DEPARTMENTAL ACCOUNT
NEEDS AND PURPOSES OF DEPARTMENTAL ACCOUNT:
- To determine the trading result of each departments.
- To compare the performance of each department to identify the weak and strong division.
- To help the proprietor formulate policy
- It is easier to separate the operation because it shows which department has most profit
- Errors can be easily detected.
- Helps to reward or reprimand departmental manager based on result.
- To ascertain the contributions of each department to the overall profit or loss
- Provide information for the remuneration of the departmental manager based on result
- Help in monitoring the progress of each department
- Gross profit of each department can easily be obtained
ALLOCATION OF EXPENSES:
- Expenses incurred for one department: Any expense specifically incurred on behalf of department will be charged to that particular department
- Expenses incurred on behalf of all the departments: Any expenses incurred for the benefit of all department not capable of precise allocation will be treated with any of these Methods/Bases:
- Turnover basis
- Floor area
- Equality basis
- Average stock held
TABLE OF APPORTIONMENT/ALLOCATION
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