Departmental Accounts

CONTENT

Meaning of Departmental Accounts

Expenses and Apportionment

Final Accounts

MEANING OF DEPARTMENTAL ACCOUNTS

Usually in a large organizations, the operations is divided into separate departments. This is because such organizations have a large volume of transactions coupled with a wide range of lines of product and as such finds it convenient and for accounting purpose to separate or divide its operations into different departments. This affords the organization easy operations and accountability.

In departmentalized organizations, the accounting process entails keeping separate journal and ledger books for each of the departments such as separate cashbook separate purchases and sales books, separate stocks, separate returns and personal ledgers e.t.c.

At the end of the financial year, the accountants bring together the separate journal and ledger books to integrate, compare and determine the department that performs better than the other (see final accounts).

FINAL ACCOUNTS OF A DEPARTMENTALIZED ENTERPRISE

The trading, profit and loss accounts of each of the departments in a departmentalized organization are  drawn separately but in a combined format called DEPARTMENTAL, TRADING, PROFIT AND LOSS ACCOUNT.

The aim of departmental, trading, profit and loss account is to compare trading result and to assist the owner of the business in formulating policies, having known the departments that perform better and those that perform worse.

NB: The Balance sheet follows normal procedure: not in a combined format.

Evaluation

1.         Discuss the term inter-departmental transfer.

2.         Explain any four bases of apportionment of common expenditure in a profit and loss account of a department store.

READING ASSIGNMENT

1.         Essential Financial Accounting by O.A. Longe page 160-171

2.         Comprehensive Accounting for S.S. by J.U. Anyaele

GENERAL EVALUATION QUESTIONS

1. Explain five errors that would affect the agreement of the trial balance
2. List and explain three classifications of ledger accounts
3. List ten accounts found in the nominal ledger
4. State the purpose of departmental accounts
5. List six items each found in the asset and liability sides of the balance sheet of a sole trader

WEEKEND ASSIGNMENT

Use the information provided below to answer question 1 – 4