Skip to content

COMMERCEIETS

STUDY TO ENLIGHTEN YOURSELF

  • BCOM GNDU NOTES – SCORE BEST IN YOUR EXAMS!!!
  • MANAGEMENT ACCOUNTING NOTES
  • BUSINESS ORGANISATION
  • DIRECT TAX LAWS
  • INTERNATIONAL BUSINESS
  • INDUSTRIAL AND LABOUR LAWS
  • OPERATIONS RESEARCH
  • RISK MANAGEMENT AND INSURANCE
  • BUSINESS STATISTICS
  • PARTNERSHIP ACCOUNTS
  • CORPORATE ACCOUNTING
  • COMMERCIAL LAW
  • MANAGERIAL ECONOMICS
  • BUSINESS MANAGEMENT
  • 11 ACCOUNTANCY
  • GOODS AND SERVICE TAX
  • MICRO ECONOMICS
  • 12 ACCOUNTANCY
  • KEY DIFFERENCES
  • COST ACCOUNTING
  • FINANCIAL ACCOUNTING
  • FINANCIAL MANAGEMENT
  • CONSUMER BEHAVIOR
  • PARTNERSHIP ACCOUNTS
  • FINANCIAL MARKET OPERATIONS
  • CORPORATE OR COMPANY LAW
  • LANGUAGE ACROSS CURRICULUM
  • INSURANCE SERVICE MANAGEMENT
  • Toggle search form
ALLOCATION OF EXPENSES IN DEPARTMENTAL ACCOUNTING

DEPARTMENTAL ACCOUNTS BCOM 1ST YEAR

Posted on July 21, 2022 By commerceiets No Comments on DEPARTMENTAL ACCOUNTS BCOM 1ST YEAR

DEPARTMENTAL ACCOUNTS BCOM 1ST YEAR

Table of Contents

Toggle
  • QUESTION: Define Departmental Accounts? What are the basis upon which the joint expenses are allocated to different departments?
  • What is Departmental Accounting. What are the basis upon which the joint expenses are allocated to different departments.

QUESTION: Define Departmental Accounts? What are the basis upon which the joint expenses are allocated to different departments?

OR

What is Departmental Accounting. What are the basis upon which the joint expenses are allocated to different departments.

DEPARTMENTAL ACCOUNTS: Departmental accounts refers to maintaining accounts for one or more departments of the company. Revenues and expenses of the department are recorded and reported separately. The departments are then consolidated into the accounts of the head office to prepare the financial statements of the company.

A department is defined as a part with the special or allocated duty/ function or area of activity.

EXAMPLE: A Textile mill which is having head office and factory. Separate accounts are maintained for production facilities and then the final results are sent to head office which is then incorporated by head office in their accounts.

Thus, a departmental accounting system is an accounting information system that records the activities and financial information about the department.

FEATURES OF DEPARTMENTAL ACCOUNTING

  • The accounts are prepared separately for each department.
  • Each department is taken as profit center.
  • Planning and budgeting is done separately for each department based on its own accounting records.
  • The accounts of various departments are consolidated to provide a whole view of the company.
  • Departmental Accounting is generally adopted by the multi national corporations.

ALLOCATION OF EXPENSES IN DEPARTMENTAL ACCOUNTING

The allocation of expenses in departmental accounting is very important issue to arrive at the correct profit and loss account of each department. The expenses are allocated in the following ways:

EXPENSES INCURRED FOR PARTICULAR DEPARTMENT

There are certain expenses which are incurred for particular departments. These expenses are known as direct expenses and charged directly to the department. Example: Salary paid to workers of sales department.

EXPENSES ALLOCATED PRECISELY

Some expenses are paid in lump-sum for the whole business but these can be allocated over different departments precisely. Example: It is possible to allocate electricity expenses over different departments precisely if separate sub-meters have been installed in each department.

EXPENSES CANNOT BE ALLOCATED TO DIFFERENT DEPARTMENTS

There are certain expenses which cannot be allocated among different departments on any sound basis. These expenses should not be allocated as nothing will be gained by an arbitrary allocation. Profits revealed by various departments should be brought down in general Profit and Loss Account and these unallocated expenses should be transferred to this account. Example: Director’s fees, interest on debentures, audit fees, general manager’s salary etc.

EXPENSES CANNOT BE APPORTIONED PRECISELY

There are various expenses which cannot be apportioned precisely. These are allocated among different departments in the proportion of a sound basis to which that particular expenditure is directly related.

CARTAGE, FREIGHT, INWARD ACCOUNT: Above expenses may be divided according to the purchase of each department.

DEPRECIATION: Depreciation may be divided according to the value of assets employed in each department.

REPAIRS AND RENEWAL CHARGES: Repairs and renewal of the assets may be divided according to the value of assets used by each department.

MANAGERIAL SALARY: Managerial salary should be divided according to the time spent by the manager in each department.

BUILDING REPAIR, RENTS AND TAXES, BUILDING INSURANCE ETC.: All the expenses related to the building should be divided according to the floor space occupied by each department.

SELLING AND DISTRIBUTION EXPENSE: All the expenses relating to selling and distribution expenses should be divided according to the sales of each department, such as freight outward, travelling expenses of sales personnels, salary and commission paid to salesman, after sale services expenses, discount and bad debts, etc.

INSURANCE OF PLANT AND MACHINERY: The value of such plant and machinery in each department is the basis of the insurance.

EMPLOYEE/ WORKER INSURANCE: Charges of a group insurance should be divided according to the direct wage expenses of each department.

POWER & FUEL: Power and Fuel will be allocated according to the working hours and power of the machine i.e. Horse Power* Hours worked.

Also StudyAlso StudyAlso StudyAlso Study
AccountingNon profit organisationDepreciationLiquidity ratios
Nature of AccountingReceipts and Payments AccountDepreciation AccountingAcid Test Ratio
Benefits of AccountingScope of accountingHire Purchase AccountingCash Ratio
Difference between cost accounting and financial accountingFinancial accounting, cost accounting and management accountingDifference between hire purchase and instalment systemFinancial ratio analysis
Difference between transaction and eventTransactionsUsers of AccountingRatio analysis
Limitation of AccountingCapital ExpenditureInstalment SystemDifference between consignment and sale
Book KeepingRevenue ExpenditureReserves AccountingAbnormal loss vs normal loss in consignment
AccountancyDifference between capital and revenue expenditureProvisions Treatment of loss on consignment
Accounting as science or an artAccounting EquationSingle entry systemAccounting treatment of consignment
Book Keeping vs accountingDeferred Revenue ExpenditureDifference between statement of affairs and balance sheetJoint venture vs consignment
Book keeping vs accountancyCapital receiptIFRSDepartmental Accounting
Accounting vs accountancyRevenue receiptBalance SheetMethods of departmental accounting
Basis of AccountingDifference between capital and revenue receiptProfit and loss AccountAllocation of expenses in departmental accounting
Branches of accountingDifference between accounting concepts and conventionsTrading AccountInter-departmental transfers
Cash and mercantile system of accountingAccounting StandardsVoyage AccountDifferent types of branches
Accounting PrinciplesObjectives of AccountingAccounting for Incomplete VoyageDepartmental vs Branch accounting
Golden ru les of accountingProcess of AccountingJoint ventureMethods of branch accounting
Double entry system of book keepingScope of AccountingJoint Venture Vs PartnershipIncorporation of branch trial balance
Double entry vs Single entry systemAccounting Concepts vs Accounting conventionsMethods of recording transactions in Joint VentureGarner VS Murray Rule
History of AccountingDifference between provisions and reservesConsignment
CONNECT ON LINKEDIN
DEPARTMENTAL ACCOUNTS BCOM 1ST YEAR
DEPARTMENTAL ACCOUNTS BCOM 1ST YEAR
Pages: 1 2 3
UNIVERSITY STUDENT NOTES Tags:advantages of departmental accounting, allocation of expenses, DEPARTMENTAL ACCOUNTING, departmental accounts, methods of preparing departmental accounts, objectives of departmental accounts

Post navigation

Previous Post: CONSIGNMENT ACCOUNTS NOTES FOR B.COM 1ST YEAR
Next Post: BRANCH ACCOUNTING NOTES FOR BCOM

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Copyright © 2025 COMMERCEIETS.

Powered by PressBook WordPress theme