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INTRODUCTION TO DEPARTMENTAL ACCOUNT
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
A. 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 show 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
B. ALLOCATION OF EXPENSES:
1. Expenses incurred for one department: Any expense specifically incurred on behalf of department will be charged to that particular department
2.
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