METHODS OF DEPARTMENTAL ACCOUNTING

Methods of departmental Accounting

Departmental Accounting 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.

METHODS OF DEPARTMENTAL ACCOUNTING

There are two methods for departmental Accounting:

METHOD 1: WHEN SEPARATE SET OF BOOKS ARE KEPT FOR EACH DEPARTMENT

As per this method, each department is taken as an independent unit and it makes its own books of the accounts.  This method is featured as:

• Separate books from other departments are maintained.
• This method is suitable for large organizations.
• The trading results are deposited with the main accountant to make the account of the whole company.
• This method is very expensive.
• It is very less common among the departmental enterprises.

METHOD 2: WHEN SEPARATE SET OF BOOKS ARE NOT MAINTAINED

As per this method, no separate records of each department is maintained, rather joint accounts are maintained of all departments. This method is featured as:

• No separate books are maintained.
• This method is suitable for small organizations.
• The whole accounts are kept by central accounts department.
• The central Accounts department maintain analytical or Columnar sales book, purchases books are maintained.
• The columnar trading accounts is maintained to calculate the gross profit and to keeping the records to stock.
• The indirect expenses are apportioned among the departments on sound basis.
• The columnar profit and loss account is maintained to calculate net profit of each department.
• The departments kept some records of sales, purchases or direct expenses at their own but not on double entry system.
• This method is less expensive.

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Nature of Accounting	Receipts and Payments Account	Depreciation Accounting	Acid Test Ratio
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Difference between cost accounting and financial accounting	Financial accounting, cost accounting and management accounting	Difference between hire purchase and instalment system	Financial ratio analysis
Difference between transaction and event	Transactions	Users of Accounting	Ratio analysis
Limitation of Accounting	Capital Expenditure	Instalment System	Difference between consignment and sale
Book Keeping	Revenue Expenditure	Reserves Accounting	Abnormal loss vs normal loss in consignment
Accountancy	Difference between capital and revenue expenditure	Provisions	Treatment of loss on consignment
Accounting as science or an art	Accounting Equation	Single entry system	Accounting treatment of consignment
Book Keeping vs accounting	Deferred Revenue Expenditure	Difference between statement of affairs and balance sheet	Joint venture vs consignment
Book keeping vs accountancy	Capital receipt	IFRS	Departmental Accounting
Accounting vs accountancy	Revenue receipt	Balance Sheet	Methods of departmental accounting
Basis of Accounting	Difference between capital and revenue receipt	Profit and loss Account	Allocation of expenses in departmental accounting
Branches of accounting	Difference between accounting concepts and conventions	Trading Account	Inter-departmental transfers
Cash and mercantile system of accounting	Accounting Standards	Voyage Account	Different types of branches
Accounting Principles	Objectives of Accounting	Accounting for Incomplete Voyage	Departmental vs Branch accounting
Golden ru les of accounting	Process of Accounting	Joint venture	Methods of branch accounting
Double entry system of book keeping	Scope of Accounting	Joint Venture Vs Partnership	Incorporation of branch trial balance
Double entry vs Single entry system	Accounting Concepts vs Accounting conventions	Methods of recording transactions in Joint Venture	Garner VS Murray Rule
History of Accounting	Difference between provisions and reserves	Consignment